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An opposing view Print
Written by Site admin   
Wednesday, 03 June 2020 12:45

An opposing view

Conventional wisdom is a wonderful thing, particularly for herding creatures. In our herds we are social animals and so agreeing with others' points of view gives us the group acceptance that we crave.

It's safe, it takes no independent thought, it's comfortable and easy to go along with the majority opinion.

Questioning, by applying thought to the reality of what is actually happening, and stating those thoughts, risks being labelled a heretic and an outcast. Now, feeling unsettled, the herd is now longer safe and comfortable for us.

Those in control of "herd think", are those who shout loudest and the most often. And so it is with the US Federal Reserve, who have told us there is no alternative to their current policies in achieving economic growth.

They want us to spend our savings and then borrow and spend, borrow and spend more. The goal, they tell us, is so the economy will not collapse but will grow again and we will all achieve Nirvana.

This became the conventional wisdom and has lasted since at least the GFC in 2008.

Lower, then negative, rates will ensure we can spend even more than we can borrow. The banks will even pay us to borrow - as long as we spend of course.

Reality is turning out a little differently.

Bank of America recently published a chart showing what happens when savings rates drop below 4%. The opposite of what the Federal reserve were telling us they expected.

Spending does increase as rates fall, but this effect changes below about 4%. Consumers then worry about their future. Ever lower rates then reduce spending and increase savings, as BofA quote:

As low growth & inflation make low-risk-asset income scarce (e.g. from government bonds), households are forced to reduce consumption and increase savings in order to meet retirement goals.

Forced saving further depresses demand in a vicious cycle.

It's a doomed loop as the full article here explains.

Range bound EURGBP Print
Written by Site admin   
Wednesday, 13 May 2020 10:00

Stuck in a loop &

Range bound

Dear Trader and Clickevents reader

As we all await release from lockdown, our enforced daily routines are tending to merge into a Groundhog Day world.

Socialising has become distancing, with WhatsApp the vital connection to our extended families. We've adjusted to taking virtual afternoon tea and barbecues with friends on Zoom and have amassed so many films and series to watch on DVDs and downloads we are starting to hope lockdown doesn't end too soon!

It's been quite a lesson in adjusting to changing circumstances and that should be no great difficulty for traders. Market dynamics never stay the same for long, morphing from one stage to the next.

Massive trends

As virus realty took hold, the Dow Jones collapsed into a rampant down trend, losing over 5,000 points in three weeks.

Then the Oil debacle between the Saudis and Russia was preceded by the collapse in demand as countries closed borders and trade.

These massive moves in oil and stock markets have been partially rescued by Trump's printing press, but many of the  currencies have stalled.

Since late March many of the currency pair charts are showing a distinct change from deeply trending to range bound.

The EURGBP is typical of these.

Diligence pays off Print
Written by Site admin   
Thursday, 09 April 2020 09:33

Diligence pays off...

Dear Trader and Clickevents reader

That is the message Governments across much of the world are telling us.

Stay at home, be diligent about following the rules, and you will stay safe, that's the message we are given

Only time will tell of course if those countries following full lockdowns, leads to an outcome that is different from those who are doing the opposite, such as Sweden.

For several decades, the goal of western world central banks, has been maximum global GDP growth. At all costs, of which, max debt was the supporting act. It's highly likely we are watching that growth collapsing as with a chain saw taken to a rotten tree.

In time, our children and grand children will read and talk about 2020 and how life was before. It's set to be very, very different in many ways.

It's a Set-up... Print
Written by Site admin   
Sunday, 05 April 2020 12:55

It's a Set-up...

This week, during a coaching session, on talking about chart setups, I was asked what is a setup? A fair question.

No, it was not referring to those whacko alternative media theories about the 'reasons' why, and from where, the Coronavirus was a 'setup' released into world.

What we did discuss were market trading setups, a noun, not a verb.

Keep Calm and Carry On Print
Written by Site admin   
Sunday, 29 March 2020 09:25

Keep Calm and Carry On

Lock down is now affecting many parts of the western world. GDP is collapsing and the chances of a major banking and bond run are getting greater, as last weeks newsletter highlighted.

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From the blog

Gold & Silver reaching Escape Velocity


Back in the 70's inflation was rampant. The post war economic stability of the fifties and sixties was replaced by economic chaos.

Tricky Dicky Nixon, aided by Paul Volker, kicked it off when they had little choice but to float the US Dollar and drop the peg of $35 per ounce of Gold.

Anyone living on a fixed income and in rented property, became a pauper. Those who owned hard assets of precious metals, land and property couldn't believe how their perceived wealth was multiplying before their eyes.

It was the best of times and the worst of times.

The rest is a history of endless money printing which far surpassed economic growth. The associated booms, bubbles and busts since the seventies can all be traced back to that decision.

The Gold price rises over time as a function of inflation and money supply. Notably, the 1979/80 spike in gold reflected inflation that kept rising. Inflation then became out of control, rising from 11.35% in 1979 to 13.5% in 1980. Paul Volker then burst the bubble with a series of shock interest rate hikes.

Gold bugs worked out that the yellow metal knew the real price of assets. The assets, and gold, still had the same utility value as they ever did, it was just the paper currency used to buy them no longerrepresented that value.

The response to the 2008 Global Financial Crisis was more money supply.QE became embedded as Gold hit a new high. It slipped back and then, this year, the Coronavirus response lead to this.....

This is then the argument for Gold that has historically acted as an anchor to monetary systems. See the next post the charts.

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