US Election: The World Is Open For Play

The United States is on the eve of a historic election. If I didn’t read the papers, or the news on the internet or any other source of information I’d still know this was true based on my general level of anxiety. Normally an anxious person, I’ve found myself sweating in the cold confines of my brother’s Idaho home. So when I say that I will be incredibly happy when the election is finally over you know I’m speaking the truth.

It won’t matter who wins the election, that level of uncertainty and anticipation will most likely not be matched by the resulting fall out. Although that too is up for debate. If Hillary is elected, I believe the fun will just be getting started. A lot of precedents will be set as it is abundantly clear (to those paying attention) that there are elements in our government that are fighting back and will do anything it takes to bring Hillary Clinton and her cronies to justice.

I constantly think back to the scene in Wolf Of Wall Street, where Leo’s character, Jordan Belfort, is about to retire (or so the audience thinks). The justice department had offered him immunity and a life of leisure if he could just quit while he was ahead. But Leo’s character was too consumed by personal ambition and greed to quit and told the audience,

“I’m not fucking leaving… They’re going to need a fucking wrecking ball to get me out of here… because I ain’t going nowhere!”

Sound familiar?

Instead of having an actual election with actual debates, the people of the United States have been forced to debate Hillary’s long history of corruption, poor leadership, and malfeasance, instead of the myriad of issues and problems facing this country that she and her ilk are directly responsible for.

In order to deflect from these obvious problems, and to ignore her own flaws, Hillary and her news organisations focused their attacks solely on Donald Trump. Once again the end result was the same, America lost so that Hillary could have one last day in the sun.

It’s hard to imagine a person more poorly suited for public office than Hillary Clinton. Her ego has cost the American people so much, and to live another four years under her rule would surely be proof that the universe is not without a sense of irony.

Given the facts it feels insane to believe that Hillary should have a real chance to win this election. If the United States was truly as great as she claimed it to be, the average American voter would be able see through this facade in a heart beat, but alas that is not the case.

She still has her supporters, a large portion of whom ironically make up the more “educated” ranks of our population. I use quotes, because I don’t believe these people received the education they paid so much money for. Unfortunately a lot of these people, and a lot of the people in my generation are drowning in debt as a result of these increasingly outdated educations. And once again the tragedy of this election has been the complete lack of attention paid to these monumental problems facing our country.

As time goes on, and technology advances it becomes increasingly clear that the most valuable capital is HUMAN capital. Take the country Israel for example. A land of dirt and not much else. Located in one of the most chaotic and war torn places on earth (once again thanks to Hillary’s policies), the country and its people have been able to thrive against all odds. They recycle all the water they need, their armies can defend against a force an order of magnitude larger than itself, and their people constantly innovate and create new technologies to continue their prosperity.

Studies are showing that humanity is regressing on a biological level. The average IQ is falling not rising, and the technology we have, hasn’t increased human education all that much. Kids are still getting the same amount of knowledge by the time they graduate high school as they did before WWII, while the world it prepares them for has left them far behind. This is despite the advent of the internet, computers, and the millions of sources of information all at the touch of our finger tips.

From the turn of the 20th century to where we are today, the human race has come a long way in a very short time, but that speed and that distance in the grand scheme are much smaller than people realize. We are not as advanced as we think we are, we are not as smart, we are not as rational and most importantly we are not as humble. We are human, and we need to understand what it means to be human. We must understand our limitations and our flaws to better combat our problems. Until we do that, until we actually have those discussions we will continue to lose, and I’m fucking tired of losing. So speak up, don’t shy away from conflict, and be open to the world. As the late and great Robin Williams used to say “The World Is Open For Play“.

The Mirage: China’s Speculative Fueled Rally

China’s speculative bubbles are fueling a false narrative that China’s on the up and up. Nothing could be further from the truth, but the fact remains that these speculative bubbles are producing second and third order effects that investors watch closely, such as the strengthening Aussie Dollar and Chinese inflation.

As Chinese citizens AND companies increase speculation in iron ore and other commodities that Australia exports, the currency strengthens.

“Steel futures also soared despite concerns about a glut of steelmaking capacity, according to economists. Jiangsu Shagang Co., a publicly traded steelmaker that posted a loss for 2015, swung back to profitability in the first half of this year partly because the steel-futures jump made Shagang’s rebar worth more.

Even Shagang is a speculator. To offset a difficult business climate, Shagang has diversified into “financial futures…venture/risk investment, real estate, etc.,” according to its website. Shagang declined to comment.”

If Shagang was only speculating in Steel futures that would be bad enough, but the firm was desperate to make a profit and even began investing in the increasingly risky Wealth Management Products WMPs.

“In late 2015, Shagang’s board authorized the company, based in China’s Jiangsu province, to buy $600 million of wealth-management products.”

As a result of all this rampant speculation commodity prices in China have been pushed through the roof.

I think you get the point. Unsurprisingly, these speculative driven commodity rallies have started to impact the real economy. In September, China reported its first YoY PPI gain since 2012.

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This spark of inflation has given markets and investors a false hope that China’s economy has started to rebound. I think now is a great time to be able to see the forest through the trees and recognize the “rebound” for what it truly is, a speculative fueled bubble. Of course, the most important and impossible to answer question for any bubble is “When does it end?”.

Now the Aussie dollar is attempting to break above a +20 month downward trend line against the Yen as well as the 50 percent retracement of the 2009-2013 move. As of writing this article I had to change the graphs to show it touched the 50 percent retracement level before ducking back below the trend line.

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With gold up, and both US stocks and treasuries down today, it looks like the market is finally realizing Trump might win this election.

The Yen too has strengthened. I remain a Yen bull until the market undergoes a phase transition. Currently the BOJ has instituted a yield control policy that would force it to buy all the bonds that are sold above a certain yield. The only way Japanese investors would sell their JGBs is if they feared inflation were to pick up. Looking at the chart below, the odds of that happening within the next 6 months are quite slim. I suspect, JGB yields will stay low especially with the central bank buying way more than the government is issuing.

With the BOJ unable to weaken the Yen, their stock market and economy should continue to implode. In the end, you cannot escape economic gravity, and with the SPY falling below a key level today, I expect more weakness to come.