AUSTRALIA MAY LOWER INTEREST RATES
The Reserve Bank of Australia is the central bank of Australia. Deputy Governor Guy Debelle hinted last week that interest rates may soon fall and that Quantitative Easing QE is not out of the question. His comments came after disappointing Real GDP growth figures were released for the September quarter. The Australian economy is looking decidedly flat.
This is the first sign of possible increased central bank stimulation in response to what appears to be a general slowing of the global economy. It is clearly contrary to the current pathway of the US Federal Reserve and the ECB (European Central Bank). Australia is a G20 nation so this is big news.
So the Reserve Bank of Australia has “blinked”. BOOM expects the Governing Council of the European Central Bank to also blink when it meets on 13th December. They will have no choice because the French economy is at a standstill due to the Yellow Vest protests and the German economy is clearly weakening. The Federal Reserve will also blink when the FOMC meets on December 18th -19th. Why? Because the large US banks will insist upon it. The FOMC is the Federal Open Market Committee.
If the ECB and the Federal Reserve do not blink or at least signal that they may blink in future, then we can all expect significant global financial turmoil to continue.
AWFUL JOB NUMBERS IN US
Last Friday’s awful job creation figures revealed a US economy going nowhere. Non farm payrolls in the US increased by only 155,000 in November. This is not enough to replace workers leaving the workforce. Every month, more than 250,000 Americans turn 65.
In the 1990’s, monthly job growth creation was double current numbers. It was common to see 350,000 – 400,000 new jobs being created each month. The Land of Trump can only dream of such numbers.
So we have economic “growth” in the US as measured by GDP but without job creation. The growth is transactional but that is not sustainable in the long run because almost all of the economic benefits are accruing to the top of the wealth pyramid, leaving the bulk of the people relatively impoverished with little hope. Depression, suicide, obesity and narcotic addiction are growing and becoming national scandals. Suicide rates have been rising in nearly every state, according to the latest Vital Signs report by the Centers for Disease Control and Prevention (CDC). In 2016, nearly 45,000 Americans age 10 or older died by suicide. Suicide is the 10th leading cause of death and is one of three leading causes that are on the rise. The rate of suicide has increased by 25% in the last 16 years. The male suicide rate is almost four times that for women, and suicide rates for whites are higher and have been climbing faster than those for other racial and ethnic groups.
There are 25 attempts at suicide for every death. So you can calculate that there are well over 1 million attempts at suicide in the USA every year. That is a sobering statistic.
The word “sustainable” was used 27 times in the G20 Leader’s Declaration from the meeting in Argentina last week.
Here they are (some excluded because they repeat too often) — sustainable development; sustainable food future and a gender mainstreaming strategy; strong, sustainable, balanced and inclusive growth; ensuring public debt is on a sustainable path; sustainable tax system; sustainable Future of Work; sustainable supply chains; inclusive and sustainable growth; sustainable development and inclusive growth; sustainable agriculture; sustainable soil; sustainable development; sustainable finance; sustainable Finance Synthesis; sustainable private capital; transformation towards sustainable development; Sustainable Habitat; We will continue to tackle climate change, while promoting sustainable development and economic growth; cleaner and sustainable energy sources; growth and sustainable development; sustainable financing practices; sustainable growth; fair, sustainable, and modern international tax system.
You get the drift? Who writes these things?
BOOM must ask the question — when does it become unsustainable to continue to use the word sustainable in reference to so many motherhood statements?
The Wiki Definition of Motherhood Statement — A vague, feel-good platitude, especially one made by a politician, that few people would disagree with. For example: “Our country must contribute to world peace.”
ANOTHER BITCOIN AND CRYPTO COLLAPSE
Bitcoin collapsed again in price last week. This is becoming a permanent BOOM editorial headline. Almost all of the other Cryptos collapsed as well with the total market capitalization of the sector dropping below $107 Billion.
There is a civil war occurring in this space. Bitcoin Cash ABC appears to be under attack from Bitcoin Cash SV. It looks like it will be a fight to the death.
WATCHING FOR PEAK MADNESS
BOOM is always watching for Peak Madness, especially in the USA where they have elevated irrationality to an art form. The last two Big Peaks occurred in the years 2000 and 2007.
In the year 2000, the United States was gripped by an irrational sense that the Internet was going to change everything so much that all previous investment parameters would be rendered null and void. It caused a huge Bull market in Internet related stocks and this became known as the Dot Com Bubble. Madness begat madness until the US stock market surged to a high point in early 2000. The technology laden NASDAQ index doubled within one year. Then it ran out of steam as rationality raised its ugly head. The NASDAQ index fell for the next 3 years from the high at almost 5,000 points to 1,000 points. Peak madness was destroyed. But just 7 years later, it all happened again.
In 2007, Peak Madness occurred again this time in regard to US house prices and bank credit expansion. There was a huge credit expansion by the financial system to meet the demand from borrowers for fresh new money (credit). The US banks gave bank loans to just about anyone who could sign a loan document. Then they engaged in many fraudulent schemes to keep the ball rolling. It was relatively easy to see the top of the madness when the whole US Yield Curve clearly inverted during 2007 and the US financial sector stocks began steadily falling. Eventually, the writing was on the wall for another collapse and the big descent began in early 2008 with the failure of Bear Stearns investment bank. The entire global financial system almost collapsed as the inter-connectedness between banks all over the world added fuel to the fire.
10 years later, it has happened again. Another Peak Madness and this time it was global.
It developed over the last 12 months in Bitcoin and Crypto prices. Bitcoin reached a high price near $ 20,000 around 18th December 2017. BOOM warned exactly on that day in an Editorial that the end was nigh and since then the price of Bitcoin has been falling. Today, on 9th December, it is struggling to hold above $ 3,500 so the fall has amounted to more than 82 % of its value at the Peak. The total Crypto market valuation has fallen from $ 833 Billion to $ 108 Billion. That is an 87% drop in valuation in one year.
BOOM saw these Peaks clearly and warned many people to take care. But BOOM may have been better occupied by just whistling in the wind. Very few listened. Why? Because most people have been trained well to listen only to the official figures of authority in politics and the mainstream media. The truth is not easy to discern when you are well trained from childhood to believe in lies.
So when is the next Peak Madness likely to happen? We must look to the USA. The recent stock market, oil market and bond market corrections appear to have have been healthy and allow some sense of rationality to form in the midst of uncertainty. But they may also be warning signs of another Peak Madness.
BOOM feels that excessive Government intervention in economies is certainly where the next Peak Madness will occur. Japan is leading the way with the US and EU close behind. Politicians naturally tend towards megalomania and they are predominantly ego driven so when all else fails economically, we can expect them to take unprecedented, outrageous steps. That means more and more governmental intervention.
They are on that road right now in the US, expanding their government and corporate bond issuance levels to higher and higher nose bleed levels, cutting taxation revenues, engaging in sanctions, raising tariffs, threatening nations. These steps do not create major economic problems in the early stages because bond issuance is not the same as bank loan debt and most of the trade wars have little effect on the US domestic economy. But eventually these heavy-handed actions could lead to a persistent failure in genuine productivity in the real non-government US economy.
There is evidence for this in the US job market. In 1948, 86 % of men in the US were in the workforce. Today, it is just 69 %. That is a huge reduction in male workforce participation. If you include women, the overall labor workforce participation rate is just 63%. That means that a lot of people are not working. Of course, those people not working may be students, disabled, carers or retired but the fact remains that they cannot contribute to economic growth. So the US has stagnant job creation and stagnant workforce growth. The US “strong growth” official narrative is clearly false.
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.
Return to the BOOM Main Website – BOOM Finance and Economics at http://boomfinanceandeconomics.com/
EMAIL: gerry [@]
PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 9th December 2018:
1. US DOW STOCK INDEX — Changed to NO Arrow Dominant
2. US TRANSPORT INDEX — Changed to NO Arrow Dominant
3. RUSSELL 2000 INDEX — 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 9th December 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/
PRICE PULSE RISING — (RED ARROW UP DOMINANCE)
# INDIAN STOCKS — UP Arrow Dominant
# JAPAN STOCKS — UP Arrow Dominant
# NATURAL GAS (SPOT PRICE) — UP Arrow Dominant
# BRAZIL STOCK INDEX — UP Arrow Dominant
# PALLADIUM PRICE — UP Arrow Dominant
# ARGENTINA STOCKS — UP Arrow Dominant
# US INFLATION PROTECTED BOND PRICES — UP Arrow Dominant
# US UTILITIES STOCKS — UP Arrow Dominant
# RWR (US Real Estate REIT Fund) — UP Arrow DominanT
# VALE STOCK (Iron Ore) — UP Arrow Dominant
# WEST TEXAS OIL PRICE — UP Arrow Dominant
# US 3 MTH T BILL YIELD — UP Arrow Dominant
# LIBOR — UP Arrow Dominant
PRICE PULSE FALLING — (RED ARROW DOWN DOMINANCE)
# RUSSELL 2000 INDEX — DOWN Arrow Dominant
# TRIM TABS US FLOAT (TTAC) — DOWN Arrow Dominant
# US HIGH GRADE CORP BONDS (LQD) — DOWN Arrow Dominant
# EMERGING MARKETS ETF (EEM) — DOWN Arrow Dominant
# FINANCIAL SECTOR ETF (XLF) — DOWN Arrow Dominant
# US KBW BANK INDEX — DOWN Arrow Dominant
# NASDAQ COMP INDEX — DOWN Arrow Dominant
# US JUNK BOND PRICES — DOWN Arrow Dominant
# COMMODITIES INDEX (USCI) — DOWN Arrow Dominant
# SWISS FRANC (AGAINST $US) — DOWN Arrow Dominant
# FRANCE STOCKS — DOWN Arrow Dominant
# AUSSIE ALL ORDS INDEX — DOWN Arrow Dominant
# THAI SETI INDEX — DOWN Arrow Dominant
# GERMAN DAX — DOWN Arrow Dominant
# TAIWAN STOCKS — DOWN Arrow Dominant
# FVL — VALUE LINE — DOWN Arrow Dominant
# US LONG BOND PRICE (TLT) — DOWN Arrow Dominant
# YEN (AGAINST $US) — DOWN Arrow Dominant
# DENMARK STOCKS — DOWN Arrow Dominant
# COAL ETF (KOL) — DOWN Arrow Dominant
# TED SPREAD — 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
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# NOMURA HOLDINGS — 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
PRICE PULSE UNCERTAIN — NON-DOMINANCE OF RED ARROW –
# US DOW STOCK INDEX — NO Arrow Dominant
# US TRANSPORT INDEX — NO Arrow Dominant
# US BIOTECHNOLOGY INDEX — NO Arrow Dominant
# US INSIDER SENTIMENT (KNOW) — NO Arrow Dominant
# GOLD PRICE in USD —NO Arrow Dominant
# GOLD PRICE (in Aus Dollars) — NO Arrow Dominant
# AGGREGATE US BOND PRICES (BND) — NO Arrow Dominant
# SWISS STOCKS — NO Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — NO Arrow Dominant
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