Risk aversion off. Risk now on (Markets)

US GDP numbers, as suspected, have reinstated market confidence that has been with us for the last 9 mths (measured by the Dow). But one should note the tight trading ranges, as analyzed in Dow breaks psychological 10,000 resistance - trading ranges reset, I don't see a major downside on indices. Yes these are risk appetite markets, but they are tight and volatility in stocks has diminished. So there is no real forward signals indicated that you would want to look at the main indices for puts or short selling. It is a professional traders market at this point in time. The ranges are just too narrow. Although new highs may not be reached in 2009.

refer to graphs:

Dow (resumption within trading range)


S&P 500 may have peaked out for 2009

Investment update October 2009 - It's cracking up (economically speaking) - risk aversion on the rise

Risk aversion has kicked in, with some US dollar recovery and Treasury buying. With stocks slumping. We could be looking at the well overdue stock market correction, but depending on more 'bad' news. A substantial sell could be on the cards. Stocks could have peaked out for 2009 on both the Dow and S&P 500. Whether we reach 2008 and 2009 lows is disputable. But the system is cracking up both private and goverment, more so banks should be coming under stress as they point (obviously) to a bell whether picture on the state of the ecomomy via credit write downs. In other words goverment unemployment statistics are good for quick option and FX trading, but at the end of the day the long term direction on equity markets, via stock prices on banks, indicates that unemployment growing. Hence credit write downs and debt provision. Also watch electronic companies post losses in coming quarters, note recent NEC (chips) loss.

Sitting on the side is the H1N1 (Swine flu) spreading throughout the northern hemisphere and the National emergency issued by President Obama. This should also be factored into the markets.

The other aspect is the massive deficits that have been created, that are straining goverment budgets as we have a huge global tax receipt shortfall; so at some point taxes/prices and costs on everything are all going to rise. With the Federal Reserve not willing to containing inflation and the money printing to Wall Street and the possibility for a second stimulus from the US goverment (extension and revision of existing stimulus plans). The whole thing is looking perilous, sure goverment bonds have been bought near term, but over supply and quality will become an issue once Americans release they are amidst a Tsunami of inflation (at some-point).

So, shorting could come into vogue, with shorting indexes; but watch supports and trading levels to see where a breakthrough on the downside has occurred. Remember these are tight trading ranges, so a rebound in oversold signal's could be significant. Should be factored by acknowledging that the Fed will rev up money printing on any economical/stock downside.

Again my long position is pharmaceuticals as they are holding well, but in risk averse environment everything is sold. Still, H1N1 is still lurking and biotechs and their bigger pharmaceuticals will profit from Goverment stuff ups on vaccination programs, meaning reordering and under ordering could have occurred. Keep in mind the two anti viral's (recognized by the markets) Tamiflu and Relenza have had their supplies hammered. So a restock should go into hyper drive, look for end year profits on companies connected to both flu drugs (refer to this article).

Shorting banks could also be in vogue again, but a watch tight ranges and monetary bailout support by the Fed and Treasury/goverment or otherwise.

US dollar buying is risky, even though it was very over sold. A downside may persist into 2010 on the back of fiscal/monetary support into 2010. Watch for Fed and GDP numbers. Option traders may be indicating that the USD is still doomed near/mid term.

*morbius glass doesn't give investment advice, trade at your own risk

Bong Danzo art for 'Deadpool Merc With A Mouth' #4

Not only the Deadpool run (Merc with a Mouth) a lot of fun and good read, the art is awesome, I love it. Especially Bong Danzo's art for the Merc with a Mouth spin off series. So with an artist with a cool name (Bong Danzo), he also draws some of the most fluid and interesting comic art currently being published.

Yes, he likes to draw women too...

I hope to buy some of his sketches from his Deadpool run at some point.

Australia - Export/import prices still falling

As discussed in Australia - first developed nation showing hallmarks of stagflation. Australia is starting to show economically stagnated signs. Basically when prices start to rise and the Reserve Bank of Australian begins to lift interest rates (1st developed country to do since the 'crisis'), it's an attempt to cool off an overheated economy thanks to an oversupply of fiscal stimulus, namely housing grants. But of course the paradox is that Australia's earnings as a country are decreasing on falling exports this can be blamed on the high Australia dollar and slower China growth (as opposed to hyper speed pre crisis).

The Terms of trade were rleased on the 23rd October and kinda flew uder the rader, but the trend is there all falling inport/export prcies, refer to graphs:

Exports/Imports


Source ABS

Japan's goverment bond market a warning?

This is something that will be watched when governments issue their debt to try and finance deficits. Since all developed nations have large account deficits, it will be interesting to see how bond auctions hold up in a bond saturated environment. Not to forget that government bonds are caught in a yield to maturity conundrum, meaning interest rates have to remain low forever; so bond prices remain relatively stable. Of course a high yield doesn't attract many buyers and you then have oversupply when issuing low yield debt. Unless you are Argentina selling junk bonds ( ARS99 at 12.33% and ARS310 at 13.91% ) with a high yield. Remember Argentina went bankrupt in 2002 and the Peso tanked.

And recently Japan ran into some problems from Bloomberg:

re: Goverment Bonds

"The sale attracted bids worth 3.02 times the amount on offer, less than 3.03 at last month’s auction and the lowest since a ratio of 2.9 at the July sale. Ten-year yields climbed to the highest level in six weeks after the Nikkei newspaper reported that the government may sell a record 50 trillion yen in new bonds next fiscal year, citing comments from an interview with Finance Minister Hirohisa Fujii . "

Total FUBAR situtaion looming.

Suede - Stay Together (1994)

She had brown eyes and an amber ring. Won't forget that anytime soon...

If the Australian dollar reaches parity against the US dollar in the next three months. A hyper-recovery is on the way

And/or hyperinflation in the US.

I have the AUD parity (against the USD) down for early 2010. But with stagflation occurring in the Australian ecomomy the Australian Reserve Bank will increase rates as quickly as possible. But the problem is as the US dollar weakens it will drive up other currencies (even without rate increases), already the EU (particularly France and Germany) are concerned on EURO strength, the Japanese on their Yen or more so the Koreans on their Won and also the export reliant Brazil with a surging Real.

The problem is not so much currencies being too high against the USD, but as a reserve currency (the USD) decreases in value, countries that trade in export markets suffer with their high yielding currencies. The imbalance is that imports will outstrip exports. Particularly when export markets suffered so much when the crisis hit in 2008. Most export reliant countries which are showing trade imbalances; one should also factor in their huge stimulus injections, low interest rates and cash hand outs which are causing a stagflated environment . As inflationary problems from oil and food have increased significantly since the global ecomomy has stabilized in the last 6-8 months. Exports need to be revved up to counter the debits in trade accounts, also countries need to boost incomes since they have all created huge fiscal deficits. *But with the USD declining as rapidly as it, the spill on effect is the structural pain to balance of trade in most countries which are all dying to lift interest rates to fend off inflation.

*(With imports piling up and prices going up and export and economic output low and stagnant. Countries like Brazil and Australia who solely run their ecomomies on commodity exports will have proplems with their high yield currencies.)

The AUD will most definitely hit parity at the current rate of USD weakness and the Reserve bank of Australia interest rate cycle. Australia needs to curp inflation pretty quickly but as it's exports have been crunched, the RBA may only move interest rates in small increases rather than big 0.50% jumps. But China (Australia's trading partner) have already showed that it prefers cheaper commodity imports. So we could see more tension refer to: China's beatdown of Australia - it's all about business or China will just sink it's own currency the Yuan, at the expense of it's (China) own inflation.

But all an all the global economy is completly out of whack with the USD in a near term collapse.

Morbius Glass store - Oris Watches

Great watches and reasonably priced.

Tumultonomics - Heavy Metal is seeing the 'end' (haven't they always?); but they maybe close this time.

Ok, my recessionomics blog posts where meant to be a look at the absurd in a recession. So it's a kinda (and I mean kinda...) humorous dissection of recession and consumption.

The blog posts ended on this post Recessionomics - update 6. The end of 'Recessionomics' blog posts, price deflation on LCD's and economic collapse, why? Well lets say that we are now entering a new phase of a economic proplems with all it's absurdity and bizarreness attached. A new phase of upheaval. Yes, goverments are starting to suck each other dicks at this point as they created feeder funds for the banks, stimulus to keep the voters happy and generally have created the biggest budget holes in fiscal history, with the taxpayer being conned and fleeced. Oh yeah but GDP seems to be rising. It's massaging numbers, goverment statisticians and officials are nervously saying the worst is behind us. But turmoil leads to a change and change didn't really come as the 'turmoil' was abated by goverment sponsored 'band aids', so by natural default the coming turmoil is going to force some big changes. While the status quo mentally via academia and self interested governing bodies maintains; it will be contradiction, hypocrisy and a shocking reality that the whole fucking thing is going to unhinge...bigtime.

No I am not a doomsday nut, but jeez can you really rationalize the irrational at this point? It's hard to do.

So begins Tumultonomics (yeah I know it's a made up word...), two words combined as one tumultuous and economics (with some alterations by letter subtraction, tumultuous being an adjective) .

Ok, so we are all heading for a tumultuous time in the next 5 years. People aren't stupid everyone knows how damaged it all got and it's barely been held together. So when a feeling creeps through it touches everything. Metal or heavy metal or black metal (and/or all the other connotations) have always used apocalyptic scenarios to sell records, why not? It's cool. But one band recently by the name of Immortal a Norwegian (black) metal band have released their new album title All Shall Fall; yes a generally bleak assessment of everything, but their promo card caught my attention, quote from band member Abbath:

"Humanity is going through big changes. I don’t know if we’ll see the end of the world, but it’s definitely the end of what used to be. Prepare for chaos with a grin on your face. But don’t be afraid. Just listen to IMMORTAL."

It's all about timing. I hope these guys sell millions of records

Dow breaks psychological 10,000 resistance - trading ranges reset

I have listened to some analysts that believed that a 10% or even a 20% correction could occur. But if you look at the Dow from a technical perspective, away from an overall overbought signals what you do see is a tight trading range and it is leaning upward. This is short term buying and selling.

This rally started from 10th July 2009 when the Dow sat at 8093 after it's lows of 6517 in March 2009.

So US markets are rallying on three things; 1) direct liquidity being pumped into markets on Federal Reserve clandestine operations at about 3 trillion to 5 plus trillion in asset swap programs. In simple terms, The Federal Reserve takes assets and gives out loans. Basically a private printing press for Wall Street. 2) President Obama's fiscal stimulus programs which essentially is trying to create consumption from tax credits and other initiatives to reinstate another consumption/asset bubble, this of course creates temporary confidence in the market. Also the US government is currently underwriting everything they can, they (US government) have essentially become a huge insurance company to the US economy. 3) The most important aspect to stock rallies in a recessionary environment is a weakened dollar. It's a no brainier that a 0% on US Dollars forces speculation, hence stock rallies.

In summary if the above three actions for equity supports continue and we could say (at this point) they are maintained ad infinitum, then stocks will go higher. The 10% /20% correction can only occur if something very dire occurs, otherwise it is a traders market and small players may get some crumbs on dips.

Trading range is now reset between 10016 and 9500, with supports at 9589/9130

With one of the best forward indicators you can use the OBV is showing an increase in forward positions (via volume) on the Dow, or 'smart money' flowing into stocks. Continued buying will take place on the Dow

please refer to graph (click for larger image)

Aussie banks pushing RBA for a rate hike - November 2009

Will they get it? It's 50/50.

The Aussie dollar is going to hit parity (unless massive risk aversion kicks in) with the US dollar at some point in 2010 with or without the Reserve Bank of Australia adding 25 basis point to the cash rate (currently at 3.25%)

But banks and insurance companies must be holding long (and big) positions on the AUD; to get two reports in one day saying consumer confidence up from Westpac Bank and then QBE insurance report saying the house prices are about to explode.

Still with unemployment a lot higher ( including the underemployed/part time employment) than government statistics actually report and immigration being cut (subtly). A more realistic aspect is of a stagnated ecomomy after goverment stimulus wears off 2009/2010.

With broad USD weakness at this point long AUD bets are on.

A stagflation environment is very real for Australia hence the RBA tightening in October 2009

MMA (Mixed Martial Arts) and the Simpsons

Looking forward to this episode...

US economy is in a submission hold (thanks to Goverment/Federal Reserve recklessness) and the consumer can't tap out.

Near death looming. Not good. Listen to these jokers:

"The survey of 44 professional forecasters released by the National Association for Business Economics, also known as the NABE, found that 80 percent of the respondents believed the economy was growing again after four straight quarters of declines.

"The great recession is over," NABE President-Elect Lynn Reaser said."

To top it off,

"With improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation," Reaser said." from: Reuters

Sad disposition for the US economy is the widening trade deficit (over capacity + increase debits) plus sinking dollar, huge fiscal budget deficits with all markets flat except for the stock market that is rallying on one thing; liquidity via the Federal Reserve. At some point there has too be some credit write-downs on the commercial credit market, so far the CMBS market has fallen out of the press. Some clever bank accounting with possible US Goverment/Fed support have extended a day of reckoning, but this should go so far.

In the meantime the underwriting of the whole US ecomomy by the US goverment should be straining quite rapidly, as US dollar concerns come into play by overseas investors and Asian/ Middle Eastern export markets. A crisis could occur only if the USD collapses through supports on the USD index, namely 0.71; at this point I wouldn't essentially say the USD is at breaking point per se, but before it reaches a critical point (namely the 0.71 support) I suspect the Fed will ask other Central banks to intervene. Which might cause a reprieve for a declining USD. Although all and all inflationary pressures now should be effecting the US consumer, again it is the two important inflationary indicators that being oil and food that are upward price pressures - which in turn are connected to everything else in consumption. So prices will be edging upward (across the board), against rising unemployment and a crowded out private sector. It is the beginning of a prolonged and broad based decline of wealth for Americans.

But a fiscal breaking point could occur very soon. If we get fear selling on the USD and global central banks cannot stop a declining US dollar. The Federal Reserve may have no choice but to increase interest rates from it's low 0%; if this is the case the Fed that is holding 300 billion plus Treasury Debt and 10 year bonds (which are more sensitive to interest rate changes). Simple bond equation: Yield up, price of bond declines (refer to The Keynesian zero bound rate and deficit effect - inflation overdrive.) so a 'sell' by the Fed prior to maturity, even if they need to reign in liquidity (by selling to investors it's bond holdings), is going to cause them to take a hit and a big one.

With investors dumping the bond market, the US deficits could structurally decay - without funding; so the tax equation must be factored in as the US goverment will have no other choice but to increase taxes. A total implosion scenario.

There is still a sell on the USD - pending a stock market correction

If you smooth out the average price you should get about a 75.44

But on a weekly graph via TRIX you can still see that the price is still negative and there is not much indication of a major rebound.

Still to be safe, go short.

*morbius glass doesn't give investment advice, trade at your own risk

Morbius Glass store - Where Have All the Leaders Gone? (Hardcover) by Lee Iacocca

Our so called leaders have failed.

Missoni Spring 2010 range

I love Missoni clothes, expensive so it's a one piece in a blue moon buy. But worth it, check out the 2010 spring range. Great colours, dampening down excess with great cuts.

Australia unemployment figures comes in stronger than market consensus.

refer to ABS website for August 2009 unemployment

The Australian goverment is walking a precarious line with their goverment statistics on unemployment (they are massaging the figures as most goverments do). Still Australia is sliding into inflation and possibly stagflation re: export market downturn refer Australia - first developed nation showing hallmarks of stagflation. This will exacerbate into 2010 (export market pain) if Australia hits parity with the US dollar.

With the Australian goverment underwriting bank debt, Australian banks can hide (off the balance sheet) decaying debt away from the eyes of the market; but the banking sector should show weakness into 2010 as 'real' unemployment goes up and (commercial/residential defaults) plus rising interest rates (Reserve Bank/retail Banks) carve into the mortgage markets.

Gold price breakout on a 'mini' crisis 2009 (update 2) - the 'mini crisis' could be near term USD dollar collpase

And the mini crisis could be near term US dollar collapse, rumours are circulating of countries already discussing (a future plan) dumping the USD as the trade currency or global base currency, particularly with oil trading. To be replaced by a stable basket of currencies, the rumour is probably more a way of making the US government and Federal reserve aware that US dollar weakness is unacceptable in international trade as USD purchase power diminishes.

So, the only thing/s that can save the USD as discussed on this blog are: A war, another credit crisis (commercial) or a 'trade' war. In the meantime as discussed in The selling of the US dollar - a USD currency crisis within the next 3mths., if the USD collapses through it's supports of 0.71; then government/central bank intervention will occur. But the commercial property crisis may cause a reprieve for any FX intervention as stock markets correct the USD may find a delay (brief) in it's decline. It would be wise to watch for stock market corrections toward the end of 2009 and bank credit losses in 2009 and 2010.

In the meantime the USD weakness is driving up gold (as an inflation hedge) and gold stocks, commodity currencies also have risen significantly more so the Australian Dollar as noted in The Australian dollar may reach parity against the US dollar in 2010.

But gold is the winner in the current climate of USD weakness

Currently overbought from it's trading ranges of 1000 and 1018; there has been reaction buying from USD dollar rumours. Any other rumour of central bank intervention will drive the US dollar higer, must be watched for any goverment/central bank reaction.

*morbius glass doesn't give investment advice, trade at your own risk

Australia - first developed nation showing hallmarks of stagflation.

Nasty.

The Reserve Bank of Australia had no choice but to increase interest rates. The Australian government threw the 'kitchen sink' (metaphorically speaking) at the Australia economy swelling the deficit to $57.6 billion + . The inflationary aspect is the Australian goverment underpinning the housing sector with large home grants which are now dramatically being removed from the economy (completed end year 2009). But even with the 0.25% increase in interest rates now brining the cash rate to 3.25%, on the same day the Australian Bureau of Statistics releases the Terms of Trade for August 2009, with bullish Australian dollar buying which has caused exports to tank at 2%, an ongoing trend of declining credits to Australia's GDP; another cue for the stagflation argument (which is that prices in Australia have NOT decreased significantly even when the global recession hit in 2008) is the imports are slowing which would indicate that consumption is crawling along (even with a high AUD).

Yet the housing market is overheated again (thanks to goverment stimulus) and general costs of living have not decreased. The slight balance would be the higher AUD, but just as noted in imports collapsing at 3%. So consumption in Australia is not partying around a strong AUD. The private sector which is struggling to survive in now hitting a stagflationary environment, as private costs of doing business didn't decrease in fact they went up (if you work in the private sector you'll know this, as of 1st July 2009 - everything went up). It was the credit market freeze of 2008 that killed off a lot of businesses (not deflation), so a deflation argument doesn't ring true that caused business to close up. Australia could be a good bellwether for a global stagflation environment, with the US going into hyperinflation.

Also refer to: Australia caught in unemployment spiral crunch

AUS credits - exports


AUS Debits - imports

Punisher Annual #1 (Marvel comics) written by Rick Remender, art by Jason Pearson

So last Friday night I am bored, I leave work and walk down to the local comic shop and pick up the Punisher Annual #1 (written by Rick Remender) and head home. Prior to settling down for the night, I pick up a burger (vegetarian) from Urban Burger and a lightly salted side dish of fries. Chow all that down and wash it down with a grapefruit Capri. Head home. Pull a chair up and start to read the Punisher Annual.

What a fun comic, two lesbian demonic hit women called Letha and Lascivious are hired too take down the Punisher. So it's rumbustious ride of craziness, these two women are able to insert suggestive (murderous) messages into peoples minds, as they (Letha and Lascivious...don't you love those names!) causing havoc in in NYC to flush out the Punisher. So insteps Spiderman, whom compared to the Punisher (as he is already resides in the reptilian side of the brain...the primitive side, so he can't be controled) is easily suggestive by thought control via Letha and Lascivious. Rapid hate then turns into love as a battle takes place with a three way (Spiderman, Letha and Lascivious) onto the Punisher, then as the two leso killers take off, it turns into a two way love in, as Letha causes Spiderman to fall in love with the Punisher. It's all fun and games, with the coolest art to go with this story courtesy of Jason Pearson.

So there you go.

Stocks correct. Question is: How significant will the correction be?

As discussed in US stocks are now 'phenomenally' overbought, it has been hard to know when the correction will come through. As equity markets have been supported by inflows of liquidity, which of course has created a bubble in stock markets. After markets closed on the 1st October 2009 the Dow lost 203 points (2.09%) the S&P 500 27.23 (2.58%).

The Dow is particularly interesting because I am looking at further falls for American express (as a 'put' option), refer to Dow rallies over 9000 closes at 9069 - July 2009 as this current sell off was lead by JPMorgan Chase & Co., DuPont and American Express , that ended up dragging the index lower.

Can a sustaining correction drop indices to lower levels? This is the big question, when ever we have had drop in stocks a rebound back into trading ranges has occurred. Depending on more band economic news, if supports are broken on the Dow at 9398 and 8993 we will see a collapse back down to July 2009 low (when the market rallied).

So a correction was due, but a bigger one may be pending.

Please click on graph for larger image:
(Note American express. All indicators show further selling. Also refer to tight trading range between supports. Pushing above 10,000 resistance has been wishful in the near term, a sustained breakout only if the USD collapses)