BOOM as at 30th September 2018

GERMANY TURNS AWAY — TRUMP’S BIGGER BRAIN — ARGENTINA KAPUT — MEANWHILE IN ITALY

Germany turned away from the US last week. The German delegation led the laughter at Trump at the United Nations and their foreign minister announced a “special purpose vehicle” aimed at avoiding the US dominated SWIFT payment system in settling trade with Iran. They are committed to maintaining the Iran JCPOA Joint Comprehensive Plan of Action agreement in defiance of the US. France, the EU, the UK, China and Russia are backing them up.

On 24th September, the EU released a statement confirming those actions by those nations.

“9. ​The participants re-affirmed their continued commitment to the objectives mentioned in the statement of the Ministerial Session of the Joint Commission of the JCPOA on 6 July 2018, in particular to pursue concrete and effective measures to secure payment channels with Iran, and the continuation of Iran’s export of oil and gas condensate, petroleum products and petrochemicals.

10. ​​Mindful of the urgency and the need for tangible results, the participants welcomed practical proposals to maintain and develop payment channels, notably the initiative to establish a Special Purpose Vehicle, to facilitate payments related to Iran’s exports (including oil) and imports, which will assist and reassure economic operators pursuing legitimate business with Iran. The participants reaffirmed their strong will to support further work aimed at the operationalisation of such a Special Purpose Vehicle as well as continued engagement with regional and international partners.”

The US was furious. Secretary of State Mike Pompeo said he was “disturbed and indeed deeply disappointed” by the EU’s decision to create a “special purpose vehicle” (SPV) designed to allow trade with Iran and bypass U.S. sanctions.

The Joint Comprehensive Plan of Action (JCPOA) known commonly as the Iran nuclear deal or Iran deal, is an agreement on the nuclear program of Iran reached in Vienna on 14 July 2015 between Iran, China, France, Russia, United Kingdom, United States, Germany and the European Union. On 8 May 2018, Trump announced that the United States would withdraw from the agreement. Following the U.S.’s withdrawal, the EU enacted an updated blocking statute on 7 August 2018 to nullify US sanctions on countries trading with Iran.

Surely, the clock must now be ticking on NATO?

TRUMP’S BIGGER BRAIN

In a Press Conference in New York on Thursday, Trump made the extraordinary statement  that China “has total respect for Donald Trump and for Donald Trump’s very, very large brain”.

Note the Wikipedia on the symptoms of Paranoid Schizophrenia (which include paranoia and delusions) —  “Another frequent type of delusion is a delusion of grandeur, or the “fixed, false belief that one possesses superior qualities such as genius, fame, omnipotence, or wealth”.

 ARGENTINA KAPUT

It’s all happening in Argentina.  The head of the Central Bank, Luis Caputo, resigned early last week.  Perhaps that makes him Kaput. And the bank raised the key interest rate to 65% which makes it the highest official benchmark rate on the planet. Suriname comes second with 25% and then Turkey comes third with 24%.

The lowest official key interest rate on the planet is set by Switzerland at negative – 0.75%. Other nations with negative interest rates are Japan – 0.10%, Sweden – 0.65% and Denmark – 0.65%.

BOOM suggests you listen to the BOOM – MBMG Podcast on Argentina recorded 11 months ago which predicted much of this. The extraordinary modern economic history of Argentina is summarized and you simply won’t believe it.

US RAISES KEY INTEREST RATE

The US central bank, the Federal Reserve, raised its key rate yet again last week by 0.25%. That is the third rate rise in 2018 which puts their key rate at 2.25%.   No one was surprised by this well telegraphed move. The sovereign bond yield curve remains positive with 30 year bonds yielding 3.208%. Investors are being herded into the short end because the long end pays less than 1% to take 30 years of risk.

This is exactly where the US wants Treasury investors to be. They want to issue huge amounts of short dated Treasuries to drive up Federal Government expenditure to fuel GDP growth and that is what is happening.  BOOM expects this state of affairs to continue for some considerable time as the US expands its budget deficit to nose bleed territory under Trump. They are not in an Argentina situation with high inflation and a collapsing currency. In contrast, they have annual CPI inflation at 2.7% and a strong currency.  As BOOM has said before, they are turning Japanese by issuing unprecedented amounts of T Bills and Bonds while their currency and CPI inflation outlook looks stable.

The principle buyers of those government issued securities are private domestic investors in the US. Foreign buyers such as China and Japan are now reluctant buyers while Russia has sold out completely. This is yet another aspect of US isolationism under Trump.

From the BOOM Editorial on 2nd July — “This all fits with BOOM’s Mega Macro theory about economic expansion. We have left the age of credit expansion and are headed into a great ocean of government bond issuance and government expenditure.”

 
MEANWHILE IN ITALY

Meanwhile the Italian government announced an expansion of its budget deficit to 2.4% of GDP. This is in defiance of the “redline” of 2% set by the European Union. BOOM has lived in Italy for some years and therefore has an understanding of the Italian modus operandi in such matters which is highly sophisticated and evolved after thousands of years of conflict.

The European Central Bank (ECB) has been the major buyer of Italian bonds over the last few years and is now attempting to reduce their overall bond purchasing program. But that plan may be stymied by Italy’s move.  So the ECB appears trapped. After all, they have been the chief financier of Italian debt. Who else will buy the new flood of Italian bonds?

From the BOOM editorial on 12th June —  “The newly installed Italian government has announced plans to spend, spend, spend and lower taxes towards a “flat tax” system. This means that they will issue a LOT more bonds to finance it all and force Mario Draghi at the European Central Bank to buy them. Draghi, being an Italian, will know that he is caught in the headlights. He is being given an offer he can’t refuse. Italians know exactly what this means. Draghi has no option other than to buy all the bonds issued by the new Italian government.  To refuse would result in instant pandemonium as the Euro and the EU would implode.  Italians invented the dark arts of bribery, blackmail and coercion long ago during the Roman Empire. They have since perfected them.

Italy is shifting gears into Japanese mode.  Bonds will be sold (and Mario will buy them), money will flow into Italian government coffers (lots of it) and it will be spent immediately in an orgy of expenditure.  The Italian economy will surge with the increase in money velocity. It will happen, because it must.”

This has huge ramifications for the experiment called the European Union. Any Euro currency nation can now follow Italy’s lead.  Why?  Because they do not have to take responsibility for their currency or the CPI inflation rate. They have all outsourced those tasks to the ECB (European Central Bank) who now have virtually no choice but to keep buying the bonds issued by their client states.

Blackmail is a political skill elevated to an art form on the Italian peninsula. It can be subtle or it can take crude forms.  On Italian roads, for example., if an Italian driver points his/her car directly at you, you must instantly recognize the message — “get out of my way, or else”. You are being given an offer you can’t refuse. To survive, you must learn to give way graciously, with panache and no emotion. The Italians call that maintaining your “Bella Figura” — the beautiful form.

Bella Figura goes well beyond image, visual beauty and presentation. It is also defined by behavior: knowing how to properly and graciously interact with others in any social or public situation.

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.

CLICK HERE FOR PODCASTS:   OUR BRAVE NEW ECONOMIC WORLD

EMAIL: gerry [@] boomfinanceandeconomics.com

PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 30th September 2018:

  1.  PALLADIUM — Changed to UP Arrow Dominant

NOTABLE PRICE PULSE CHANGES OVER THE LAST WEEK ENDED 30th September 2018:-

 PALLADIUM — Changed to UP Arrow Dominant
PALLADIUM

PRICE PULSE RISING — (RED ARROW UP DOMINANCE)

# PALLADIUM PRICE — UP Arrow Dominant
# 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 USD —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
# 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
# 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

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/

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.

Neither the information nor any opinion expressed constitutes a solicitation to buy or sell any securities nor investments. Do NOT ever purchase any security or investment without doing your own and sufficient research.  Neither BOOM Finance and Economics.com nor any of its principals or contributors are under any obligation to update or keep current the information contained herein. The principals and related parties may at times have positions in the securities or investments referred to and may make purchases or sales of these securities and investments while this site is live. The analysis contained is based on both technical and fundamental research.

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MOLS   Denmark
MOLS Denmark

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