Morning call
Well, it’s a new day, a new quarter and a new half year. Fairly incredibly, the SPX had the best quarter performance since 1998. Well, we know what happened in 2000. Asian equities up, European ones down. Odd, given that the police in Hong Kong are arresting people under the new security law, and using water cannon on protesters. Dollar is flat, (nearly) all commodities up (including gold). Bonds all seem to be down (i.e. yields up). Andrew Bailey, BoE Governor, says that inflation may be coming. John Plender says the same thing, but more elegantly. One third of advertisers say they won’t advertise on social media. This is a budget cut disguised as a signal of virtue (the problem is that FB refused to take on the role of deciding which of Donald Trumps statements/tweets they would allow voters to see).
Updates
H/T to Credit Bubble Bulletin:
House Prices
WR has another great article, this time on house prices. He kind of points out the obvious: that nobody has a clue what will happen to them. He couches this specifically in respect of reporting of the latest Case-Shiller figures, but all news everywhere will suffer from the same problem. My guess is that house prices are going to take quite a dive. Interest rates for high-grade borrowers are probably as low as they can go, without the banks losing money on every mortgage, so finance is going to dry up, even though the banks have been pumped full of stimulus. You can force banks to build up their reserves but nothing in the world can make them lend them, no matter how much money creation the BoE does. Wolf has written a parallel piece on the UK housing market. Mortgage approvals have fallen by a factor of seven. If that doesn’t flush out some desperate sellers, I don’t know what will. I would not like to be an estate agent in this climate, but EA’s have a remarkable ability to survive a fee drought. Sadly, no options traded on Foxtons, (AFAIK) the only listed UK EA.
Trading
Trading ideas:
- short bonds (pity there are no gilt futures options),
- short $FB,
- short $HSI.
As always, this is not investment advice, and now is almost certainly not the right time. As Trader Vic says, execute only when the technicals agree with the fundamentals. Don’t ask me about technicals.
Wrap
Commodities were all over the place, bonds weaker, stocks generally stronger on a reaction (supposedly) to Trump caving in on banning Huawei, and generally signalling that he’s not going to do anything to damage trade with China (any more than it’s already been damaged).
Stats are all over the place with massive percentage gains in things like ADP payroll numbers, because of artifically depressed levels last month.
Generally, my feeling is that things are going to slump again, but I have no real evidence for this.
The tanker trade is coming back to life. The short calls on Robin Hood faves is doing OK, but uses a lot of capital.
A bit of politics and economics
It seems that a big sticking point in the UK’s negotiation with the EU is the fact that the UK wants to stop being bound by EU rules on state aid. I just can’t imagine why we’d want to die in a ditch for the right to load deadweight costs on ourselves by subsidizing producers. It’s as if nobody in government has come across the fact that unsubsidized competitive markets maximize the sum of consumer and producer surplus. Or, maybe they have, but they want to make sure their party gets enough donations to win the next election.
Comments !