Whipsaw Wednesday – Yesterday’s Gains Reversed Before Commercialization
As we noted in yesterday’s members live chat room, bouncing exactly off our predicted line of 4,350 (see yesterday morning report) at very low volume there was nothing exciting and was actually considered a failure for the day – especially since all the gains came on the open and we just continued from there ..
Things started to reverse as soon as yesterday’s close and we are now back to Friday lows and a technically failing market. Oil (/ CL) peaked at $ 79.78 yesterday and we set foot there as well as in shorts at 12:12 p.m. in our chat room which averaged $ 79.08 and already this morning. we’re at $ 4000 and we’re going to stop 2 out of $ 78.50 and the other two at $ 78.75 to lock in the gains but hopefully today’s EIA inventory report sends us back below of $ 77.50, for another gain of $ 4,000 before it happened:
Last night’s API report showed a “surprising” build (for Economorons) of 951,000 barrels of oil, 3.7 Mb of gasoline and 2.5 million barrels of distillate – doesn’t quite look like the picture of the high demand that Goldman Sachs, Barron’s and other paid manipulators were trying to paint last week, right? For more information, check out the classic: “Goldman Global Oil Scam Passes 50 Madoff Mark!“See, it doesn’t matter if we expose the scam – there are new suckers being born every minute…
Commodity prices in general are exploding and, as you can see from this chart, this is a very strong indicator of an upcoming recession. Why? Because you get less stuff for more money – that’s why. How will productivity increase if you get less stuff for more money? How will the economy grow when you get less stuff for more money?
Add to that an INSANE policy from the Fed that claims there is no inflation during one of the worst inflation waves on record – and you have a recipe for disaster, that is why Elizabeth Warren last week called Fed Chairman Powell “The most dangerous man in America.”
Having 10% inflation and 0% interest means that your cash is devalued at a rate of 10% per annum. 10 years ago and your lifetime savings are reduced to zero. This is why money is pouring into housing (again) and stocks – there is nowhere else to get a return but neither housing nor stocks guarantee a positive return – which keeps the government going. to borrow money (by selling bonds) at ridiculously low interest rates. – at least you know you will get your (devalued) money back.
And the government NEEDS money – they’re borrowing about $ 250 billion a month this year. Only the interest on this new $ 3 billion at 2% is $ 60 billion, which is more than what the United States spends on agriculture ($ 49 billion), natural resources and the environment. ($ 40 billion), science, space and technology ($ 34 billion) or energy ($ 7 billion). And, currently, Congress has not voted to extend the debt ceiling, which means that every month we have to find an additional $ 250 billion in programs to cut – like veterans affairs ($ 218 billion ), education ($ 236 billion) or transportation ($ 146 billion). Of course, we’re not going to touch our $ 1,000 billion military budget, are we?
This is, of course, Trump’s budget from last July and what Congress says is “Of course, we passed the budget, but we’re NOT going to allow PAYING for it – that would be crazy!“So we will default, if that happens and then maybe all of our credit cards will be canceled and then we will have to live within our means, which means – unfortunately – we have to either cut government spending by $ 50. %, or increase taxes. by 100% – choice of reseller.
And discretionary spending, you’ll notice, is “only” $ 1.6 billion of the $ 6.6 billion budget – these are the programs I noted above – they should be cut FULLY and THEN we should cut an additional $ 1.4 billion from our $ 5 billion. mandatory spending, but then there would be no government to collect or distribute it – so that’s kind of a moot point …
We’ll see which side of the 4,350 the S&P 500 ends up on today, but the main headwind at the moment is a stronger dollar, driven by demand from China, where investors are panicking buying back their mortgage-backed real estate bonds. dollar as other Chinese companies join us. Evergrande on bankruptcy supervision.
Debt securities issued by companies such as Kaisa Group Holdings Ltd., Redsun Properties Group Ltd. and Yuzhou Group Holdings Co. fell. An 11.25% Kaisa bond due April 2022 fell to less than 73 cents to the dollar Wednesday night in Hong Kong, from more than 86 cents at the start of Tuesday, according to Tradeweb.
The issuance of new debt by Chinese companies is now 17% – the highest level in 10 years, so of course defaults will start to spread and we could be in a real real estate crisis in no time. if the Chinese government does not. intervene (they’ve been doing a gradual, gradual bailout of Evergrande for a month, but it’s spreading anyway).
The main trigger for the recent declines has been the default on Fantasia’s bonds, which occurred just days after Evergrande missed a second interest payment deadline on a set of dollar bonds. While Evergrande has a 30-day grace period before its offshore investors can declare a default, there was no grace period on the Fantasia bond that matured on Monday.
Fantasia’s non-payment surprised investors as the Shenzhen-based developer recently said he had no liquidity issues and indicated that he had enough cash to repay the unpaid amount of a bond in five-year dollars issued in 2016. Fantasia, like Evergrande, was an asset issuing high-yield dollar bonds in recent years.
“The business has been extremely active. It was very agitated; the markets are very nervous, ”said Michel Lowy, Managing Director of SC Lowy, a financial institution specializing in troubled, high-yield debt. “It’s not just Fantasia. It was important, but seeing the developers come up with some pretty horrific sales numbers for September doesn’t help, ”he added.
Be careful there!