BOOM as at 15th October 2018

STOCK MARKETS THUMPED
ARE WE AT PEAK MADNESS YET?

In regard to the US, BOOM is always looking for Peak Madness — but, despite last week’s reported mayhem in the financial markets, it seems a long way away as far as BOOM can tell. The Dow Jones Stock Market index dropped 4.2% for the week but the volumes traded were not especially notable. The Dow is now back to where it was 2 months ago. The NASDAQ index and S & P index are back to where they were at 4 months ago.

It is important to note that high quality US corporate bonds went up in price during the week. Long dated US Treasury bonds went up in price during the week. The Total Bond Market ETF went up in price during the week (BND). So the US bond market appears to have stabilized quickly at a lower price level.

Meanwhile, commodities prices were relatively stable and the major currency crosses were also relatively stable, as was the US Dollar Index. Iron Ore Futures in China (Dalian) were strong all week while Palladium and Copper prices were strong. The oil prices for Brent Crude and West Texas Crude dropped about 4% but that is well within their weekly trading ranges.

The mainstream media in the US and advanced western nations panicked. They screamed in unison — “the end of the financial world is here”, all dutifully following the official narrative. It was designed to generate maximum fear in the audience. Mainstream “journalists” all seem to think they are players in a reality TV show, following a script designed to create conflict and anxiety. And they are not far wrong. Delusion begets delusion, and especially so if no perspective or deep knowledge is employed.

But the real economic and financial reality is this — the central planners have a lot of levers yet to pull. The Federal Reserve (central bank) in the US can put short term interest rates on hold, then they can drop them, then they can do a little more QE, then they can move the US Dollar down (by buying foreign assets), then they can get the government to boost bank loan creation via taxation incentives, then they can ………… then they can …….

It’s called Fiddling while Rome burns. In the USSR, this went on for decades. It all collapsed in 1989 when productivity collapsed. I think we are a long way from that in the US and even further away in China but I may be wrong, of course. History repeats but not always the exact same way.

History Never Repeats by Split Enzhttps://www.youtube.com/watch?v=tzuJXqgsiSM

INFLATION IN GERMANY, SWEDEN, SPAIN
EXPORTS FROM CHINA GROWING

The Inflation Rate in Germany was confirmed last week at its highest level in almost 7 years. The annual inflation rate increased to 2.3 percent in September from 2 percent in the previous month. It was the highest inflation rate since November 2011 as prices of services, energy and food increased at a faster pace. The Swedish annual inflation rate also hit an almost 7 year high at 2.3%. And the annual inflation rate in Spain increased to 2.3 percent in September. In Norway, it was reported as 3.4 percent year-on-year. Global inflation is here surely?

Exports from China increased by 14.5 percent year-on-year to USD 226.67 billion in September. That is a staggering increase. Just as BOOM had forecast previously, the so-called trade war with the US is not having much effect on this key figure for the Chinese economy.

So it appears that we have global growth and global CPI inflation, all fueled by historically low interest rates and increased government expenditure programs in the US and China. Currently, 64 nations have annual CPI inflation at levels higher than 4%. Another 57 nations have levels between 2 – 4% while 40 are between 1 – 2%. China and the US have official inflation rates of 2.3%. Only 8 nations have negative inflation rates.

Despite this, the IMF (International Monetary Fund) cut its global growth forecast from 3.9% to 3.7% saying trade tensions between the U.S. and its trading partners may disrupt economic activity worldwide. That got a lot of mainstream media coverage but BOOM has documented dozens of “IMF Warnings” over the last few years, all of which have not been helpful in the long run. A reduction in forecast of just 0.2% is hardly significant. You have to wonder why they bothered. After watching IMF forecasts and statements for many years, BOOM has learned to ignore them.

COMMUNITY BANKING IS THE FUTURE

BOOM is a big fan of community owned banking (as opposed to shareholder owned banks that have to pay dividends from their profits). The majority of banks in Germany are community owned and geographically local in their operations. This explains much of the stability and resilience of Germany’s economy since 1945.

Professor Richard Werner explains succinctly why this is essential for all nations to understand in this short video — https://www.youtube.com/watch?v=LQOeVnGqtuY

More information here — https://professorwerner.org/

TRUMP NOT LIKED INTERNATIONALLY

Donald Trump and his merry men at the White House are not liked offshore. A recent Pew Research poll has shown that people in many nations express significant concerns about America’s role in world affairs. They feel that the U.S. doesn’t take into account the interests of other countries when making foreign policy decisions. And they believe the U.S. is doing less to help solve major global challenges than it used to. BOOM suggests reading —

US TREASURY BONDS STABILIZE
CORPORATE BONDS RISE IN PRICE

Long US Treasury Bond prices and yields stabilized last week quite nicely. It looks like the Federal Reserve is happy with the shape of the US Treasury yield curve for now. The yield on a Treasury Bond of 30 Years duration is now 3.338%. On a one month T Bill, it is now 2.132%. Whether or not a differential yield of 1.2% over 30 years is enough to satisfy investors is debatable. BOOM suspects that this will increase slowly in the next few months resulting in a steeper yield curve for US Treasuries. But, for the present moment, the interest rate outlook is probably now stable again.

The US corporate high yield junk bond market ETF (JNK) fell last week during the pandemonium but recovered well towards the end of the week and recorded no fall of any note over the 5 day period. The investment grade corporate bond ETF (LQD) ended the week higher in price than last week.

CRYPTO REFUSES TO DIE

The world of Crypto simply refuses to die. And no one seems capable of delivering the knock out punch. It appears stuck at a total market capitalization of around $ 200 Billion. This compares with over $ 240,000 Billion of fiat currency in existence. And BOOM cannot see any reason why the total Crypto market capitalization cannot fall from here.

However, BOOM thinks the phenomenon as a whole is slowly morphing in substance.

The “stablecoins” are a symptom of that. In simple terms, a stablecoin is a “cryptocurrency that has price stable characteristics”. Most stablecoins are pegged against the USD, but some implementations in the future intend to move over to a basket of currencies or an index such as the CPI. This article in Coin Journal is a good starting point to begin understanding that phenomenon — https://coinjournal.net/the-rise-of-stablecoins/

Examples of “stablecoins” linked to the US Dollar include Dai, Paxos, TrueUSD, Gemini USD, USDCoin, Tether and the LBXPeg — a UK Pound stablecoin. You can look at them all on the Coin Market Cap website. https://coinmarketcap.com/

BOOM sees Cryptos as a tool (or a set of tools) — not dissimilar to a hammer which can be used to build a building. The hammer has almost no intrinsic value itself but it is essential in creating the building. The “buildings” that are built in future by using Crypto tools could well have inherent substance and therefore, value. However, that could be achieved with almost no inherent value in any single Crypto tool itself.

Likewise, the Blockchain and DAG (Directed Acrylic Graph or Tangle) technologies are just examples of distributed ledgers, clever self-maintaining data bases. They are potentially the master plan or operating system of the building process but they also have no intrinsic value as far as BOOM can tell. They are just tools, not much unlike any other digital data base or spreadsheet.

BOOM suggests that readers watch closely for the next iteration of the Crypto phenomenon. It will be the true test. We will all be able to see if these tools can be used by innovative thinkers and entrepreneurs in building a better future that is a natural progression from the past.

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

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

EMAIL: gerry [@] boomfinanceandeconomics.com

PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 14th October 2018:

1. TRIM TABS US FLOAT — Changed to NO Arrow Dominant
2. US HIGH GRADE CORP BONDS (LQD) — Changed to NO Arrow Dominant
3. AGGREGATE US BOND PRICES (BND) — Changed to NO Arrow Dominant
4. TAIWAN STOCKS — Changed to DOWN Arrow Dominant
5. FVL — VALUE LINE — Changed to DOWN Arrow Dominant
6. US KBW BANK INDEX — Changed to DOWN Arrow Dominant
7. GERMAN DAX — Changed to DOWN Arrow Dominant

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

1. TRIM TABS US FLOAT — Changed to NO Arrow Dominant
TTFS

2. US HIGH GRADE CORP BONDS (LQD) — Changed to NO Arrow Dominant
LQD HIGH QUALITY CORP BONDS

3. AGGREGATE US BOND PRICES (BND) — Changed to NO Arrow Dominant
BND

4. TAIWAN STOCKS — Changed to DOWN Arrow Dominant
TAIWAN STOCKS

5. FVL — VALUE LINE — Changed to DOWN Arrow Dominant
FVL VALUE LINE

6. US KBW BANK INDEX — Changed to DOWN Arrow Dominant
BANKING INDEX

7. GERMAN DAX — Changed to DOWN Arrow Dominant
GERMANY DAX

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 14th October 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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