BOOM as at 18th August 2018

TECTONIC FINANCIAL EVENTS — ANOTHER BERLIN WALL? — ARGENTINA HIKES INTEREST RATES TO 45% — OIL STILL FALLING — BAYER SHARES CRUNCHED
 

TECTONIC FINANCIAL EVENTS

ANOTHER BERLIN WALL?
 
Last week BOOM suggested that international cooperation could move towards protection of the Turkish Lira currency that has been under sustained attack on the foreign exchange markets. Helpful nations could achieve that by making large investments in Turkish stocks and bonds. This would justify President Recip Erdogan’s refusal to raise interest rates. And it would mean that he also would not have to apply for IMF assistance and would not have to apply capital controls inside Turkey.

Erdogan’s stance is in outright defiance of the post World War Two global financial orthodoxy that was arranged at Bretton Woods in July 1944. That defiance over-rules the influence of global financial markets, the IMF’s role and the rigidity of capital controls.  So this is possibly a historical moment in global financial history of equal significance to the fall of the Berlin Wall.

It is no secret that the pendulum of global financial influence may now be swinging towards the East. Turkey is the pivot of that pendulum because of its geographic position and because it is the second most powerful nation in NATO from a military standpoint. Its connections to Europe are strong and so are its connections to nations to the East such as Russia and China.

Many nations will be hurt financially if the Turkish Lira continues to collapse against the US Dollar.  French, Italian and Spanish banks are active in Turkey. And many German companies operate there.  There is a strong inter-personal connection with Germany as there is a very large Turkish population living in Germany as permanent residents. Many Germans by birth are now of Turkish descent.

So what has happened?  The Turkish Lira has stabilized over the last week and rose by around 10% from its low point against the US Dollar and also against most other major currencies. On Friday, the BIST stock market Index rose by 1.83%.  Also, the leaders of France and Germany have been reported as showing concern for the situation. Qatar has pledged $ 15 Billion of investment in Turkey and Russia has indicated a willingness to settle trades between the nations in Lira and Rubles, avoiding the traditional international settlement role of the US Dollar.  China has also indicated concern.

We are possibly witnessing an event as significant as the fall of the Berlin Wall in financial and Geo-political terms. Defiance of the IMF and economic orthodoxy is very difficult for small or less powerful nations such as Venezuela or Argentina whose currencies and economies are also under attack. But Turkey is another matter altogether. The stabilization of the Turkish Lira last week and the rise in the Turkish stock market on Friday are intriguing but not yet consequential. This week will be critical.

METALS FALLING

US Dollar prices for Gold, Silver and Copper are continuing to fall sharply. They began this current steep decline in early June.

Platinum is also falling steadily and has done so since January. And the Industrial Metals ETF in New York DBB has been on a steep downward journey that began in June.  These declines are all the opposite of the US Dollar Index direction during 2018. Worth watching this week.

ARGENTINA HIKES INTEREST RATES TO 45%

Last week, Argentina raised its key interest rate to 45%. It is facing a CPI inflation crisis along with a weak currency on global foreign exchange markets. Its sovereign bond yield curve is inverted and its (official) annual inflation rate is now at 31.2%.  Its stock market index (the Merval) reached a high point at 35,461 in January and has since suffered persistent falls to below 26,000.  That is a decline of 25% in just over 6 months. It is on track for a fall of 50% by years end if this decline continues.

Unfortunately, Argentina has no strong international allies to call upon to help it defend its currency here as does Turkey and it has a long history of poor political leadership. Their current crop of leaders sought help from the IMF in June receiving a $ 50 Billion loan. Foreign investors are unlikely to come to the rescue through increased investment so things look grim for Argentine citizens financially.

This is what happens when a nation has been poorly led for many years by politicians who just don’t understand money creation, banking or how to manage an economy. There is some hope in recent reports that the Argentine central bank is seeking assistance from the People’s Bank of China (China’s central bank).

BOOM has often said that Argentina is a never ending economic experiment in real time.

OIL STILL FALLING

In editorials written on 9th and 15th July, BOOM indicated that global oil prices must begin to fall in order to allow global economic growth to continue.  In the previous 2 years, the global oil price doubled from $ 36 to $ 74 per barrel.

Since 9th July, the price per barrel of Brent Crude has fallen from around US$ 79 to $ 71. That is a fall of about 10%.  Meanwhile, West Texas Crude has fallen 12% from over US$ 74 to $ 65.

This is a very positive event in favor of continued global economic performance.

Also, BOOM’s two key forward-looking indicators of global economic performance have suddenly turned higher in the last week. It is early days but BOOM is now looking for a positive response from global stock markets especially in China, Hong Kong and the so-called “emerging” markets as evidence for a return to certainty in global growth.

BOOM readers should watch those markets closely in the following weeks for positive responses. The events in Turkey and the oil markets are of a tectonic, historic nature and yet most observers appear asleep at the wheel.

BAYER SHARES CRUNCHED

The shares of the German group Bayer are traded in New York in the Pink Sheets market. Those shares fell 15.28% last week. They have now fallen almost 40% in less than a year.

Pink sheets are daily publications compiled by the National Quotation Bureau with bid and ask prices of over-the-counter (OTC) stocks, including the market makers who trade them. Unlike companies on a stock exchange, companies quoted on the pink sheets system do not need to meet minimum requirements or file with the SEC. Pink sheets also refer to OTC (Over-the-Counter) trading.  Quote: Investopedia.com

Bayer is a very large German company that has recently completed its take-over of Monsanto in June at a final valuation of US$ 66 Billion. Monsanto was ordered by a California judge on 10th August to pay $ 289 Million damages to Dewayne Johnson, a school groundsman who was diagnosed with Non-Hodgkin’s Lymphoma in 2014.  Johnson had used the Monsanto weed-killer, Glyphosate (marketed globally as Round Up but also by many other brand names) regularly in his job. Glyphosate is the world’s most common weedkiller.  There are reported to be 5,000 similar plaintiffs in the US so the California court ruling could possibly lead to multiple other claims against Monsanto.

This is an environmental and financial story that will take years to unfold. Worth watching closely.

In economics, things work until they don’t.


Until next week …………  Make your own conclusions, do your own research.

BOOM does not offer investment advice.

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PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 18th August 2018:

1. TAIWAN STOCKS — Changed to NO Arrow Dominant
2. COMMODITIES INDEX (USCI) — Changed to DOWN Arrow Dominant

===================================================================

NOTE — RED ARROWS INDICATE BOOM PRICE PULSE DOMINANCE in the present moment (as indicated by the date of the chart and taking into account the 3 year time frame shown).  The charts are now arranged in PRICE PULSE RED ARROW DOMINANCE.    NOTE: All Charts are WEEKLY Charts over the last 3 YEARS time frame.  Arrows indicate PAST price action (not future).  No predictions are implied from past action.

Comments refer to past PRICE PULSE (Red Arrow DOMINANCE) over the last 3 years, the week ended 18th August 2018.  You can RIGHT CLICK a chart and OPEN in a New Tab.   Make your own conclusions, do your own research. BOOM does not offer investment advice. 

PLEASE NOTE — Many charts are ETF’s from NY Market  (not the base commodity or currency etc). The NY Stock Code is in the Top Left Hand Corner of each chart.
Charts are produced from http://www.stockcharts.com

Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/


NOTABLE PRICE PULSE CHANGES OVER THE LAST WEEK ENDED 18th August 2018:-

1. TAIWAN STOCKS — Changed to NO Arrow Dominant
TAIWAN STOCKS

2. COMMODITIES INDEX (USCI) — Changed to DOWN Arrow Dominant
COMMODITIES

================================================================

PRICE PULSE RISING — (RED ARROW UP DOMINANCE)

# US HIGH GRADE CORP BONDS (LQD) — UP Arrow Dominant
# US INFLATION PROTECTED BOND PRICES — UP Arrow Dominant
# US UTILITIES STOCKS — UP Arrow Dominant
# AGGREGATE US BOND PRICES (BND) — UP Arrow Dominant
# US LONG BOND PRICE (TLT) — UP Arrow Dominant
# RWR (US Real Estate REIT Fund) — UP Arrow DominanT
# AUSSIE ALL ORDS INDEX — UP Arrow Dominant
# INDIAN STOCKS — UP Arrow Dominant
# VALE STOCK (Iron Ore) — UP Arrow Dominant
# US BIOTECHNOLOGY INDEX — UP Arrow Dominant
# WEST TEXAS OIL PRICE — UP Arrow Dominant
# US DOW STOCK INDEX — UP Arrow Dominant
# RUSSELL 2000 INDEX — UP Arrow Dominant
# US TRANSPORT INDEX — UP Arrow Dominant
# US INSIDER SENTIMENT (KNOW) — UP Arrow Dominant
# NASDAQ COMP INDEX — UP Arrow Dominant
# US JUNK BOND PRICES — UP Arrow Dominant
# US 3 MTH T BILL YIELD — UP Arrow Dominant
# LIBOR — UP Arrow Dominant
# FRANCE STOCKS — UP Arrow Dominant

PRICE PULSE FALLING — (RED ARROW DOWN DOMINANCE)

# TED SPREAD — DOWN Arrow Dominant
# GOLD PRICE (in Aus Dollars) — DOWN Arrow Dominant
# COPPER PRICE — DOWN Arrow Dominant
# INDUSTRIAL METALS ETF (DBB) — DOWN Arrow Dominant
# YUAN (AGAINST USD) ETF — DOWN Arrow Dominant
# HANG SENG — DOWN Arrow Dominant
# GOLD PRICE in USD —DOWN Arrow Dominant
# SOUTH KOREA STOCKS — DOWN Arrow Dominant
# SINGAPORE STOCKS — DOWN Arrow Dominant
# THAI SETI INDEX — DOWN Arrow Dominant
# AUSSIE DOLLAR AGAINST US DOLLAR — DOWN Arrow Dominant
# CANADIAN DOLLAR AGAINST USD — DOWN Arrow Dominant
# BRAZIL STOCK INDEX — DOWN Arrow Dominant
# ARGENTINA STOCKS — DOWN Arrow Dominant
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# NOMURA HOLDINGS — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# SWISS FRANC (AGAINST $US) — DOWN Arrow Dominant
# PLATINUM PRICE — DOWN Arrow Dominant
# SHANGHAI STOCKS — DOWN Arrow Dominant
# PALLADIUM PRICE — DOWN Arrow Dominant
# BITCOIN INDEX $NYXBT — DOWN Arrow Dominant
# SWISS STOCKS — DOWN Arrow Dominant
# DEUTSCHE BANK SHARES — DOWN Arrow Dominant
# FOOD INPUT PRICES (DBA) — DOWN Arrow Dominant
# EURODOLLAR INDEX ($XED) — DOWN Arrow Dominant
# COMMODITIES INDEX (USCI) — DOWN Arrow Dominant

PRICE PULSE UNCERTAIN NON-DOMINANCE OF RED ARROW

# TAIWAN STOCKS — NO Arrow Dominant
# DENMARK STOCKS — NO Arrow Dominant
# YEN (AGAINST $US) — NO Arrow Dominant
# JAPAN NIKKEI STOCKS — NO Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — NO Arrow Dominant
# TRIM TABS US FLOAT — NO Arrow Dominant
# COAL ETF (KOL) — NO Arrow Dominant
# FVL — VALUE LINE — NO Arrow Dominant
# US KBW BANK INDEX — NO Arrow Dominant
# NATURAL GAS (SPOT PRICE) — NO Arrow Dominant
# GERMAN DAX — NO Arrow Dominant

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