China rate cut today = China’s reaction to Abenomics and its official statement that it is going to war with Japan. now that China and Japan are in a currency war, expect more from the ECB as the Euro should begin to appreciate against these currencies. like i said before, this whole, tit for tat, my stimulus beats your stimulus, balance sheet measuring contest will end with Abe. tough to be a bear while this is happening but it will pay dividends when its all over. this could easily end up in a 1929 style valuations and wipeout. i mean, how much of the Nikkei does the BoJ and GPIF have to own before investors say, hmm, “this is f&%ked!” and Japan experiences hyperinflation?
Right, and I agree for the most part. But, I don’t see a problem with short-term tactical allocations based on capital market expectations as long as a large portion of your time horizon is invested close to your strategic allocation. Although I do think some contraints on deviating from your strategic allocation (+/- % allocation bands, time period, etc.) should be in place to mitigate behavioral biases.
^Agreed. I wonder what the bullish Yen case is? If Abe suceeds, the yen weakens on stimulis and rising inflation. If Abe fails, the yen weakens on a Japanese depression.
All of this is excellent for managed futures funds…who are already having a great year after 5 miserable years of high global cross correlations between all asset classes.
Canadian inflation at 2.8% y/y and climbing. Damn US dollar killing us. Bank of Canada may need to abandon guidance and look at moving on rates sooner than expected. Unfortunately we don’t have sustained growth for that. While no one should care about Canada on a global scale, I do wonder if we are going to start seeing more central banks getting squeezed by inflation on one hand and limited growth on the other.
isn’t this inflation, what Bernanke likes to call, transitory. the currency can only fall so much each year so technically if the bulk of the increase is due to currency, this increase should not happen again next year unless the currency falls significantly again. i would not expect Canada to boost rates any time soon. certainly not before the Fed and likely not while China is cutting. canadian inflation will eventually dip below 2% as currency effects wear off, then rebound as a lower CAD results in stronger overall economic growth. this process will take 18-24 months minimum in my opinion.
I mean you can certainly try, most people can’t do this sucessfully. You have to be right twice…on when the market is too high and then again on when the market has fallen enough. If you sell too soon, you miss gains. If you buy too early in the market fall, you’ll lose money and possibly sell out again. If you miss the market bottom, do you buy in or wait for the next pullback? Each move requires trading costs as well obviously.
You may be able to do it, and if you can then you’ll have a very sucessful career in asset management. The majority of people can’t, even those with shiny CFA designations.
When trading tactically (which market timing basically is) the magic word is “enough”. The top tick is by definition the most expensive tick. This is why things like targets are essential to discipline in most trading strategies.
Is that ex food and energy?
The East is too weak to sustain any rate increases.
^ Core CPI increased 2.3% y/y.
The rate of CPI-XFET (ex- food, energy, indirect taxes) has doubled since this time last year. Our decliing dollar is a big issue for inflation. We aren’t even seeing that much of the energy benefit as oil and gasoline in Canadian dollars is not signficantly changed.
^ I wouldn’t be concerned if I was the Bank of Canada as I don’t see it becoming a trend. Rather, I see the opposite happening. Most of the world is slowing down and a major bloc is close to deflation. Wage growth is non existent. Governments are in austerity mode. The next few years will be extremely challenging for provinces as they will have to find creative ways to cut spending dramatically which will slow demand. Municipalities are in worse shape. More underemployment and unstable jobs will lead to lower spending. I don’t see stagflation because I don’t see energy prices going anywhere in this environment. People should stop underestimating how brutal deleveraging can be.
Time is heavily important in the stock market. It is what i do best along with chart science. Yes, it is a science. Long term tops and bottoms are not that difficult.
I didn’t know there was a bullish case for Yen. Secondly, Abenomics was doomed to start with. There will not be inflation in Japan. How bad it is going to get really depends on the BoJ.
There is no market manipulation.
^make sure to let us know the day before this next market top
The past will repeat itself. 
The big deal is sovereign-related nonsense, not corporate. The USG is bankrupt; NPV $(100)T. They only barely propped the economy up after printing trillions, inflating the value of stocks/bonds, increasing income-inequality, and issuing endless happy-pants fake numbers. Now they stop the printing for a moment and act like they want to hike rates. Meh, what happens is anyone’s guess, but it seems unlikely the US economy holds together without more intervention. US consumers don’t have any money (see income inequality). The 15% upper middle class and upper class who DO have money aren’t going to spend it. We have it in financial markets where it’s getting pumped up by global QE man!! We ain’t gonna pull it back into M1 to buy some cheese. I’m putting 60% probability on massive volatility in 2015, and during one of the spasms the Fed will lose their nerve and do QE4. Definitely ready to short the S&P500 in between the time it goes to hell and the USG announcing they will “save things”; when QE4 begins I’m all in with leverage for some more asset price inflation. 
Well, I don’t do technical analysis, but it seems a bunch of the US oil producers just defaulted. Not sure how they stay in business at these, or lower prices during 2015. This is just the kind of disaster I’m waiting patiently for…
purealpha, I do not agree with everything that you said.
But I do award you the “not a fuck was given” award, though.
Citigroup is saying the decline in oil is basically $2T in stimulus with WTI at ~$66. i can’t verify the number but if that’s remotely true, i think it would be near impossible for markets to do poorly when you have $2T in fiscal stimulus and ~$1.25T in aggressive monetary stimulus occuring at the same time. i’ve been pretty bearish for a while but that combination is tough to trade against, at least in the short-term.
I really haven’t been following this closely, but what’s driving the collapse in oil prices??
It seems a little fast to be technology driven (alternatives, tar sands, etc.). Conflict in Russia/Middle East tends to drive prices up, not down.’
I guess global recession, or the idea that US’s unwinding of QE will reduce demand for those who see oil as an inflation hedge device. But that feels a bit like grasping for straws…
Any thoughts?
I agree QE4 is coming, not sure if it’s 15, 16, 17 or whatever. IMO we go roughly sideways until the post-QE3 flogging occurs. Mean time we are in a “stock picker’s market” which in reality means all potential longs are expensive but many shorts are dangerous and hard to execute upon. Today’s stock market is terrifying and requires serious testicular fortitude to navigate imo.
No need to look further. Europe, Japan, China.
I’ve been looking into this too. I believe the most likely factor that caused last friday’s price action was the inability for OPEC to maintain its monopoly pricing power.
OPEC countries heavily reply on oil as their dominant export, and lately, they have been running budget deficits, which reduces incentives for member countries to reduce output to maintain pricing.
Gov Deficit (% GDP) Oil as % of Exports Breakeven Price $ OPEC Output Allocation Output % Total OPEC Algeria -2.3% 97.0% 130.5 862 3.4% Iran -4.5% 80.0% 130.7 3,964 15.5% Iraq 0.9% 84.0% 100.6 n/a n/a Kuwait 29.2% n/a 54 2,167 8.5% Libya -0.5% n/a 184.1 1,446 5.6% Nigeria -1.5% 95.0% 122.7 2,224 8.7% Qatar 9,1% n/a 60 700 2.7% Saudi Arabia 6.2% 90.0% 106 8,775 34.3% United Arab Emirates 5.0% 45.0% 77.3 2,356 9.2% Venezuela -9.8% n/a 117.5 3,107 12.1% Russia -0.50% n/a n/a 7201 n/a
Source: EIA, CIA Factbook website, Wiki
Prior to this, OPEC has been slowly losing its market share due to Shale Oil. OPEC only produces 30-40% of todays oil production. http://www.economist.com/blogs/graphicdetail/2014/11/daily-chart-15
Looking forward, if OPEC cannot regain it’s monopoly then:
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Lower limit of oil prices should converge to the margin cost of production for major oil producers
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The upper limit of oil prices - ?