Black Swan Capital
• China’s overseas sales slid 21.4 percent in June
from a year earlier, the customs bureau said today on its Web site,
after a record 26.4 percent drop in May. (Bloomberg)
• The cost of
borrowing longer-term U.S. dollars in the London interbank market
continued to fall Friday, with the key three-month rate reaching its
lowest since the advent of British Bankers' Association Libor fixings
back in 1986. (WSJ)
• Producer prices fell at a record pace in Japan 6.6 percent. (Bloomberg)
Key Reports Due (WSJ):
10:00 a.m. May Trade Balance: Expected: -$30.0B. Previous: -$29.16B.
10:00 a.m. June Import Prices: Expected: +1.9%. Previous: +1.3%.
10:00 a.m. Mid-July Reuters/U Mich Sentiment Index: Previous: 69.
“All war is based on deception.”
FX Trading – China Panic!
is dead in the water without exports. They are in panic mode. That is
why they are flooding their economy with massive amounts of capital and
suppressing any hint of decent everywhere. That is why they have
chased out the major financial news outlets, and forced them to take
all cues from the state. But no matter how many bridges they build,
excess capacity they expand, stock market propping they do, dollar
reserve currency jawboning they employ, or internet sites they shut
down, it doesn’t change the fact that exports have crumbled and until
Mr. US Consumer starts buying again, it will get worse instead of
better. The brunt of global rebalancing is upon, as it is for all
those so dependent on exports.
Our piece earlier this week
warning of falling BRICs is based on China as the major disappointment
that could trigger another major run out of emerging markets. And that
means the dollar (likely yen too—more on that from our special guest
below) catches a major risk bid.
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that China seems to be the corporate earnings touchstone, the impact of
disappointment would most likely rippled through the earnings forecasts
of all those companies who believe that stimulating infrastructure,
property, and stock markets, is the same as stimulating either domestic
demand or exports. We think analysts will learn that GDP growth and the
real stuff that makes an economy work can at times be two completely
different animals. That new realization would likely hammer US stocks
in its wake—green shoots morph to brown weeds.
Bottom line: we think there is only you need to know about what’s happening in China, and it is this…
What is interesting is that these are OFFICIAL statistics! It makes one wonder—a skeptical mind that is.
Black Swan Capital LLC
A guest piece today from Yves Lamoureux, Investment Advisor, Blackmont Capital Inc.
Systematic desensitization from reality…..
discourse has hardly changed. What was not seen and forecasted is
rarely challenged today. The same dead heads speak and we listen. It
becomes increasingly difficult for the average man to keep his
critical thinking at this important juncture. Herd mentality is strong
and responsible for herd thinking. We on the other hand kept our
deflation cap on and never changed optics unless we had to.
optimism is misplaced. Never has an economy rebounded vigorously in a
low rate environment. Put another way around, there is no more magic
bullets. The scale of the excess is going to be matched by the length
of the adjustment. We simply love the unwinding theme since early 2007
and part of that strategy has been to be long yen. Here is an excerpt
from “Why financial air raids are about to start “written in March 2007.
believe one way of being naturally short stocks is to be long
“things.” Preferably Oil, Gold & Yen. In our essay we pointed at
the carry trade as culprit. There are of course more problems to come.
This is what we will find out in the “price discovery”. The Yen will
take time to unwind. Especially given how fashionable it had become for
Japanese investors buying Uridashis. At the point of recognition we
will still have another 50% move to unwind the trade. It is exactly at
the time of maximum anxiety that investors will repatriate funds
invested overseas. This could become an enormous problem for all
markets. Confidence cycle analysis points down to 2011.
believe today that we are close to that recognition point which will
mark that half way point in the great unwinding. As a rule this
suggests more painful corrections ahead. You will notice from the
graphs the great tendency of the yen to lead stocks (charts below). It
did it before and looks to be doing it again. We recently broke very
critical level and this does not bode well for the market. It is a
signal of more deflation ahead.
Japanese yen – US $
Dow Jones Industrial Average:
a wall of worry would actually be a good feeling .People seem empowered
by talk of greenshoots and this mass hysteria can only lead to
trouble. Systematic desensitization is a type of behavioral therapy
used in psychology to help overcome phobias. The phobia of risk in the
stock market is gone. We can only thank the master puppeteer for that.
Yves Lamoureux, Investment Advisor, Blackmont Capital Inc.
opinions contained in this report are those of the author and are not
necessarily those of Blackmont Capital Inc.. Every effort has been made
to ensure that the contents of this document have been compiled or
derived from sources believed to be reliable and contains information
and opinions which are accurate and complete. However, neither the
author nor BCI makes any representation or warranty, expressed or
implied, in respect thereof, or takes any responsibility for any errors
or omissions which may be contained herein or accepts any liability
whatsoever for any loss arising from any use of or reliance on this
report or its contents. BCI is an independently owned subsidiary of CI
Financial. CI Financial is a Canadian owned diversified wealth
management firm, publicly traded on the TSX under the symbol CIX.
Blackmont Capital Inc. is a member of CIPF and IIROC.