BOOM as at 22nd September 2018

EDITORIAL —

FEAR, DELUSION, PARANOIA IN THE WHITE HOUSE — THE BELT AND ROAD — 103 NATIONS — 5 BILLION PEOPLE — CHINA BOOM STARTING

Donald Trump is determined to “win” the trade war with China. As BOOM has previously explained, that is very unlikely as China can simply switch any “lost” marginal exports destined for America to other nations in the $ 70 Trillion global economy or retain those goods inside its own borders. In regard to imports, total Chinese imports per year from all nations amount to about $ 2,200 Billion per year. Of that, China imports about $ 130 Billion of goods and services from the US.  So the American contribution amounts to just 6% of the total. China can survive without the US.

Wilbur Ross is the US Secretary of Commerce. He was appointed by Trump and is a major protagonist of the Trade War. Larry Kudlow, an ex TV Show host, is Trump’s Director of the Economic Council. Steve Bannon, the former White House Chief Strategist is no longer in the White House but is known to be an advocate of Tariffs. He is quoted as saying last week that “Trump will make it unbearably painful for China. Trump won’t relent in the US-China trade war until reaching “victory”. “We’re at economic war with China.”

If BOOM can do the mathematics of trade, why can’t Donald Trump, Larry Kudlow, Steve Bannon and Wilbur Ross do so?

In regard to oil, Trump tweeted an extraordinary message during last week. He said “We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!”

Protection and threats are reminiscent of a business model that evolved in Naples and Calabria in the South of Italy.  A Bloomberg article on the Tweets during the week was headlined “Trump’s OPEC Tweets Mix Fear and Delusion”.

THE BELT AND ROAD
103 NATIONS
5 BILLION PEOPLE
 

China’s Belt and Road Initiative (BRI) is the core element in China’s Eurasian expansion policy. The BRI is a strategy that focuses on enhancing regional connectivity and infrastructure right across Eurasia, from the East Coast of China to the Western shores of Europe. There are 103 nations involved with a combined population of 5 Billion people. All of those people can be connected with rail and road with almost no need for sea transport. Goods will travel across this vast region via land and as the connections grow, the trade will grow.

The Shanghai Cooperation Organisation (SCO), or Shanghai Pact, is the Eurasian political, economic and security alliance, the creation of which was announced on 15 June 2001 in Shanghai by the leaders of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. Since then, it has been joined by India and Pakistan.

“Observer States” are Afghanistan, Belarus, Iran, Mongolia.  “Dialogue Partners” are Armenia, Azerbaijan, Cambodia, Nepal, Sri Lanka & Turkey.  And Egypt, Syria, Israel, the Maldives, Ukraine, Iraq, Bahrain, Qatar have all shown interest in joining. The United States applied for observer status in the SCO, but was rejected in 2005.

At a 2005 summit in Kazakhstan,  the SCO issued a Declaration of Heads of Member States of the Shanghai Cooperation Organization which addressed their concerns and contained an elaboration of the organization’s principles. It included: “The heads of the member states point out that, against the backdrop of a contradictory process of globalization, multilateral cooperation, which is based on the principles of equal right and mutual respect, non-intervention in internal affairs of sovereign states, non-confrontational way of thinking and consecutive movement towards democratization of international relations, contributes to overall peace and security, and call upon the international community, irrespective of its differences in ideology and social structure, to form a new concept of security based on mutual trust, mutual benefit, equality and interaction.”

Projects under BRI include ports, rail, roads, bridges, power stations, oil and gas pipelines and water management. The initiative is expected to connect China’s underdeveloped hinterland to Europe via Central Asia, and to various points on the Indo-Pacific seaboard via land corridors through South and South East Asia. Understanding the risks and opportunities posed by China’s future path is critical to understanding Trump’s “Trade War”. It has been estimated that the BRI infrastructure will involve the expenditure of around US$1.3 trillion (equivalence) and potentially generate up to 150 million tonnes of incremental steel demand, doubling the growth rate of local steel demand from 2011 numbers.

Most nations trade their excess production to gain foreign currency and the US Dollar has been the major settlement currency since World War 2 ended in 1945. Many Trillions of US Dollars exist outside of the USA to assist in fulfilling that role. They are housed on the Ledgers of multiple non-US central banks and non-US commercial banks.  They are called “Eurodollars” wherever they are outside the US. At present, they are used to settle about 60% of global trade. The Euro is used to settle about 20% and the remaining 20% is settled by multiple currencies.

The world cannot do without Eurodollars at present because they are convenient, generally accepted and trusted as a store of value but there is a slowly growing trend towards trade settlement using the mutual currencies of trading partners. For example, China will pay for its oil and gas from Russia with Yuan. And Russia will pay for Chinese trucks with Rubles.

This trend is growing especially in the SCO nations.

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank that aims to support the building of infrastructure in the Asia-Pacific region. The bank currently has 87 member states from around the world. It is seen as a potential rival to the World Bank and IMF.

Regional Member nations include Afghanistan, Australia, Azerbaijan, Bahrain, Bangladesh, Brunei Darussalam, Cambodia, China, Cyprus, Fiji, Georgia, Hong Kong, India, Indonesia, Iran, Israel, Jordan, Kazakstan, Korea, Kyrgyz Republic, Lao PDR, Malaysia, Maldives, Mongolia, Myanmar, Nepal, New Zealand, Oman, Pakistan, Philippines, Qatar, Russia, Samoa, Saudi Arabia, Singapore, Sri Lanka, Tajikistan,  Thailand, Timor-Leste, Turkey, UAE, Uzbekistan, Vanuatu, Vietnam.  Non Regional Members include Austria, Canada, Denmark, Egypt, Ethiopa, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Luxembourg, Madagascar,  Malta, Netherlands, Norway, Poland, Portugal, Spain, Sudan, Sweden, Switzerland, United Kingdom.

Prospective Members include Armenia, Argentina, Cook Islands, Belarus, Kuwait, Belgium, Lebanon, Bolivia, Papua New Guinea, Brazil, Tonga, Chile, Ecuador, Greece, Kenya, Peru, Romania, South Africa, Venezuela.

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to improve social and economic outcomes in Asia.

Headquartered in Beijing, it began operations in January 2016 and has now grown to 87 approved members worldwide. By investing in sustainable infrastructure and other productive sectors in Asia and beyond, it will better connect people, services and markets that over time will impact the lives of billions and build a better future.

There are 12 Board Members of the AIIB Board of Directors — from Australia, China, Russia, Saudi-Arabia, Turkey, Austria, Korea, India, Canada, Indonesia, Philippines and the UK.

Did you notice that the US is neither a Member of the SCO or the AIIB?  But interestingly, the AIIB presents its accounts in US Dollars with a total capital base of US$ 19 Billion of paid-in capital.

CHINA BOOM STARTING

 

Last week, BOOM noted good evidence of what looks to be the clear beginnings of another China economic expansion. BOOM stated on 20th August — “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.”

From the events of last week, that scenario now appears to be happening. But it is still early days.

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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EMAIL: gerry [@] boomfinanceandeconomics.com

PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 22nd September 2018:

1. US LONG BOND PRICE (TLT) — Changed to NO Arrow Dominant
2. THAI SETI INDEX — Changed to UP Arrow Dominant
3. ARGENTINA STOCKS — Changed to UP Arrow Dominant
4. SWISS FRANC (AGAINST $US) — Changed to NO Arrow Dominant
5. PALLADIUM PRICE — Changed to NO Arrow Dominant
6. JAPAN NIKKEI STOCKS — Changed to UP 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 22nd September 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 22nd September 2018:-

1. US LONG BOND PRICE (TLT) — Changed to NO Arrow Dominant
TLT

2. THAI SETI INDEX — Changed to UP Arrow Dominant
THAI SETI

3. ARGENTINA STOCKS — Changed to UP Arrow Dominant
ARGENTINA MERVAL INDEX

4. SWISS FRANC (AGAINST $US) — Changed to NO Arrow Dominant
SWISS FRANC

5. PALLADIUM PRICE — Changed to NO Arrow Dominant
PALLADIUM

6. JAPAN NIKKEI STOCKS — Changed to UP Arrow Dominant
JAPAN STOCK INDEX

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

PRICE PULSE RISING — (RED ARROW UP DOMINANCE)

# ARGENTINA STOCKS — UP Arrow Dominant
# THAI SETI INDEX — UP Arrow Dominant
# TRIM TABS US FLOAT — UP Arrow Dominant
# 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
# 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)

# COAL ETF (KOL) — DOWN Arrow Dominant
# 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
# AUSSIE DOLLAR AGAINST US DOLLAR — DOWN Arrow Dominant
# CANADIAN DOLLAR AGAINST USD — DOWN Arrow Dominant
# BRAZIL STOCK INDEX — DOWN Arrow Dominant
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# NOMURA HOLDINGS — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# PLATINUM PRICE — DOWN Arrow Dominant
# SHANGHAI STOCKS — DOWN Arrow Dominant
# BITCOIN INDEX $NYXBT — DOWN Arrow Dominant
# DEUTSCHE BANK SHARES — DOWN Arrow Dominant
# FOOD INPUT PRICES (DBA) — DOWN Arrow Dominant
# EURODOLLAR INDEX ($XED) — DOWN Arrow Dominant
# COMMODITIES INDEX (USCI) — DOWN Arrow Dominant

PRICE PULSE UNCERTAIN NON-DOMINANCE OF RED ARROW –

# US LONG BOND PRICE (TLT) — NO Arrow Dominant
# PALLADIUM PRICE — NO Arrow Dominant
# SWISS STOCKS — NO Arrow Dominant
# SWISS FRANC (AGAINST $US) — NO Arrow Dominant
# TAIWAN STOCKS — NO Arrow Dominant
# DENMARK STOCKS — NO Arrow Dominant
# YEN (AGAINST $US) — NO Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — 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

Disclaimer: All content is presented for educational and/or entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice, nor is it at all intended to be taken as such. The commentary and other contents simply reflect the opinion of the authors alone on the current and future status of the markets and various economies. It is subject to error and change without notice.The presence of a link to a website does not indicate approval or endorsement of that web site or any services, products, or opinions that may be offered by them.

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