March 6, 2019
The Enablers....FED and the Central Banks
This is just going to be a quick technical update. We haven’t truly seen anything game changing take place over the last two weeks.
We continue to hear chatter of a China/US trade resolution, but we doubt this pig will be dealt with any time soon. This chart to the left is certainly cannon fodder for #POTUS to continue to pound the pavement for a much better US trade deal.
The Commerce Department released their latest numbers last Thursday which showed that Imports exceeded Exports by a new record of $914 billion in 2018. (WSJ)
Trade imbalances are very difficult to actually change. When we look at who is supplying vs who is demanding, when we look at who has the capacity to produce, the proper labor costs, the proper input costs, these are just a few of the chaotic variables that go into quantifying trade activity. Now toss in a bit of currency construct and things really take a whole new meaning. We figure this situations isn’t going to be resolved any time soon and considering the record deficit, its pretty safe to say, Mr.Trumps power position is certainly in a bit of jeopardy.
Before we get to the market technical’s and February recap, let’s look at another great topic that we have seen pop up over the last few weeks, income inequality. As many of our readers know we squarely blame the FED and the central banks directly for this, as they are the enablers. They claim dual mandate of steady prices and full employment, yet this next chart makes it quite clear, that by enacting QE and low artificial long term interest rates, the FED and all the central banks target one class and one class only…the owners. Who are the owners? Well all those that are lucky enough to own businesses, to own shares, to have equity, to have bonds, to have trusts. This chart should make this point painfully clear:
What’s truly sad is that some of the central banks aren’t even denying such antics, as outright private asset purchases and free loans have become common place. When people clamor like @AOC does constantly that capitalism is to blame for inequality, she obviously doesn’t understand our monetary system…then again, why expect her to, she was hand picked out of 10k applicants by the Justice Democrats, who somehow were fortunate enough to install 6 candidates to Congress…who funded them, is my question!
For all those economic fundamentalists out there, I hate to break it to you, but the next stop for US yields is #ZERO and pegged till the system burns down because as this next chart shows, until the US dollar or the US economy has some real competition from the consumer side and trust side, this is the only chart that matters:
How much of a drain on economic efficiency is $600 billion a year in interest? Think of the money that needs to created just to pay for interest? Is it me or is this not the dumbest mechanism in a modern digital age where we can simply price by the true intrinsic worth of supply and demand.
Ok on to the charts and since we are on yields, lets just look at the US 30yr bond which is now back above the 50p Vwap:
We can see that the FED’s weak knees has caused the US yield curve to continue to steepen, depicted by the FOB or US 5y30y spread:
Gold was the talk of the town just a few weeks ago, but now it seems to have lost its lustre. We tend to look at Gold not by itself but rather vs its other metallic counterparts, like Copper. Copper has outperformed Gold since late January:
Quite often we like to look at the European DAX market for any indications of equity direction. It seems as if the 50p Vwap has put in enough support for the market to bounce:
Moving on to the SP500 we can see the 2811 has been hit a multitude of times over the last 6 months and this recent bounce has seen a trade right up to it once again:
We took a peak at the Google’s chart and we thought it was curious that this last new high is being met with diverging Stochastics, so will see how this signal pans out:
Finally we close with the performance sheet of the markets that we follow, Crude continues to be this year’s top performer up over 24% while the VIX is the laggard down over 22%. You can reference the list at the end of this letter for more info.
Also we would like to mention that one of our close allies is moving up the Amazon best seller list with his book Q-Anon An Invitation to The Great Awakening. We turned most of our readers on to “Q” in 2018 but we have followed the movement ever since. The mainstream media likes to use “conspiracy theory” when it comes to this topic, yet we know who are trusted sources are and this movement is very real. So real that you will continue to hear more about it in the coming months, they go by the #WWG1WGA (Where We Go 1 We Go All) Anyhow, as our readers have come to know, we like to keep you up on the latest trends so you can be the highlight of your office or your cocktail parties. Thank you for reading, cheers.
Finally, we will decidedly end our notes with our reaffirmation of the growing need for alternative strategies. We would like to think that our alternative view on markets is consistent with our preference for alternative risk and alpha driven strategies. Alternatives offer the investor a unique opportunity at non correlated returns and overall risk diversification. We believe combining traditional strategies with an alternative solution gives an investor a well-rounded approach to managing their long term portfolio. With the growing concentration of risk involved in passive index funds, with newly created artificial intelligence led investing and overall market illiquidity in times of market stress, alternatives can offset some of these risks.
It is our goal to keep you abreast of all the growing market risks as well as keep you aligned with potential alternative strategies to combat such risks. We hope you stay the course with us, ask more questions and become accustomed to looking at the markets from the same scope we do. Feel free to point out any inconsistencies, any questions that relate to the topics we talk about or even suggest certain markets that you may want more color upon.
Capital Trading Group, LLLP ("CTG") is an investment firm that believes safety and trust are the two most sought after attributes among investors and money managers alike. For over 30 years we have built our business and reputation in efforts to mitigate risk through diversification. We forge long-term relationships with both investors and money managers otherwise known as Commodity Trading Advisors (CTAs).
We are a firm with an important distinction: It is our belief that building strong relationships require more than offering a well-rounded set of investment vehicles; a first-hand understanding of the instruments and the organization behind those instruments is needed as well.
Futures trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.
Nell Sloane, Capital Trading Group, LLLP is not affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.
This newsletter is published by Capital Trading Group, LLLP and Nell Sloane is the editor of this publication. The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete. It should be noted that Capital Trading Group, LLLP nor Nell Sloane has verified the completeness of the information contained herein. Statements of opinion and recommendations, will be introduced as such, and generally reflect the judgment and opinions of Nell Sloane, these opinions may change at any time without written notice, and Capital Trading Group, LLLP assumes no duty or responsibility to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Any references to products offered by Capital Trading Group, LLLP are not a solicitation for any investment. Readers are urged to contact your account representative for more information about the unique risks associated with futures trading and we encourage you to review all disclosures before making any decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Nell Sloane, Capital Trading Group, LLLP and their officers, directors, and/or employees may or may not have investments in markets or programs mentioned herein.