#Euro (Globex) Intraday Commodity Futures Price Chart: Sept. 2013 : CME

Euro jumps against Dollar

Euro (Globex) Intraday Commodity Futures Price Chart: Sept. 2013 : CME

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Registered #Gold at the #Comex LT Chart on Jesse’s Café Américain

Registered #Gold at the #Comex LT Chart on Jesse’s Café Américain

The MasterMetals Blog

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Are #commodities warning of a slowdown, or reflecting the oncoming Fed #tapering?

commodities vs. DM equities

commodities vs. DM equities, Morgan Stanley

Why Markets Have Been Rallying While Commodities Have Been Tanking
Joe Weisenthal

For much of the early part of this century, we’ve been used to seeing commodity prices rally on “good” news. If the stock market were accelerating, then oil would be rising too. When markets fell, commodities would also be in decline.

That’s not been the case over the last two years, as this chart from Morgan Stanley makes clear.

So what’s the story?

Are commodities warning of a slowdown, or reflecting the oncoming Fed “tapering” in some way?

In Morgan Stanley’s note, titled The Message From Commodity Markets, strategist Manoj Pradhan argues that cyclical factors are not sufficient to explain the divergence, and that the real story is one of an actual structural shift in the commodity markets.

The common structural story is composed of two halves. One is that a lot of supply has been built up during the boom. The other half is that emerging market growth has downshifted.

— Supply side: The physical capacity built in the ‘up’ phase of the commodity cycle was likely based on inflated expectations of real commodity demand. High commodity prices created a terms of trade shock that made investments in commodity capacity hard to ignore. Australia, Russia and Brazil have succumbed to the Dutch Disease, while Malaysia and Indonesia contracted a milder version. Even Brazil, where the export basket is far less commodity-oriented and far more diversified in commodity exports than its Latin American neighbours, around 50-60% of private investment and the bulk of FDI in 2011 were directed towards the commodity sector. As the global balance of growth has changed in the way we describe below, those expectations have proved to be difficult for reality to measure up to.

— Demand side: EM growth is at risk and the transition to more sustainable models of growth has been difficult. To boot, China’s new administration appears to be accepting both lower growth and a move away from investment to improve the quality of its growth. Both aspects of this change reflect lower structural demand for commodities. The investment-driven phase of China’s explosive growth involved a surge in infrastructure investment to support the re-export model of growth. Growth, if driven by households, is unlikely to generate the same demand for hard commodities. It could certainly drive demand for soft commodities, but consumption has not yet become the main driver of China’s growth and is unlikely to do so in the near future. Why? The associated fall in household savings would remove the implicit subsidy given to investment and hurt growth more than it would stabilize it (see again The Global Macro Analyst: Why Is EM Under Fire?). Moreover, China’s innovations in extracting more out of its domestic resources and also from lower-quality resources in the last 3-5 years are putting further strain on commodity prices.

But Pradhan doesn’t think these stories explain the whole thing. He’s more intrigued by the idea of a re-industrializing United States, that will provide manufactured output, but at a much more commodity efficient clip than the emerging world. That’s the real story, he says, which explains both commodity weakness and the strength in developed market equities.

Read more:  Why Markets Have Been Rallying While Commodities Have Been Tanking – Business Insider

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It costs #Japan 24% of its revenues to pay the interest on its #debt, if rates rise to just 2.2% it will take 80%

It costs the Japanese government 24% of its revenues just to pay the interest on its debt at current rates. According to my friend Grant Williams (author of Things That Make You Go Hmmm…), if rates rise to just 2.2%, then it will take 80% of revenues to pay the interest. Even at the low current rates, the explosion in Japanese debt has meant that interest rate expense has risen from Y7 trillion to over Y10 trillion. Note in the chart below (also from Kyle) that the Japanese government is now issuing more in bonds than it pays in interest. Somewhere, Charles Ponzi is smiling.

Just for fun, here is a picture of Mr. Ponzi writing a check (courtesy of Geert Noels).

Central Bankers Gone Wild | Thoughts from the Frontline Investment Newsletter | Mauldin Economics

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Peter #Degraaf The Long Wait is almost over for #Gold

All the charts on #Gold

Peter #Degraaf The Long Wait is almost over for #Gold

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The Utility Average $DJU has crashed since its recent high

The Utility Average has a history of topping out simultaneously or with a few month’s lead over the whole market.  Look at the chart

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A #chart says it all #Apple Earnings – The Hangover #MasterTech $AAPL

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Apple Earnings – The Hangover

While immediately after earnings, we were treated to a plethora of self-justifying talking heads exclaiming how wonderful the worst news was, how positive the future looked, how leveraged dividends were great, and how awesome iPhones 5S sales will be inevitably; it seems the market (which one bright chap noted ‘must know something’ when the stock was soaring) is now testing its recent lows… The selling appears to have started once Tim Cook began pitching the future as opposed to discussing the current state of affairs. AAPL has dropped almost 9% from its overnight highs and is near 17 month lows.

 

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#China Narrowly Averts #Credit Bubble Pop With Latest Government Bailout Of First Domestic #Bond #Default | Zero Hedge

See the whole article here:  China Narrowly Averts Credit Bubble Pop With Latest Government Bailout Of First Domestic Bond Default | Zero Hedge

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#Brazil depends on #China for 17.5% of their foreign #trade

slowdown in China would likely crush Brazil’s external sector and domestic economy while an economic crisis in Brazil would have a minimal impact on the Chinese economy

How A Hard Landing For China Became A Helicopter Eject Seat For Brazil | ZeroHedge

Depending on what market or macro indication you choose to believe in, China is doing terribly badly or is on a sustainable path to a more domestic consumption-based economy. This weekend’s PMIs show the economy is barely limping higher but Industrial Output is dismally low; HSI is ripping higher while SHCOMP is at multi-year lows. What is more critical, as Bloomberg’s Michael McDonough points out today, is China’s growing role as a transmission mechanism between the economies of the developing and developed world. China’s economic rise has been accompanied by a surge in its appetite for imports – especially raw materials – even as global demand has been slow to recover. This introduces new stresses for many export-oriented countries by reducing the diversity of their trade relationships as they become more and more dependent on China in particular, creating substantial risk for those economies, which account for an increasing share of global GDP. Russian, Brazilian and Indian trade volumes have become heavily dependent on China at 10.6 percent, 17.5 percent and 9 percent, respectively. An economic crisis in Brazil would have a minimal impact on the Chinese economy, while a slowdown in China would likely crush Brazil’s external sector and domestic economy.
 
Source: Bloomberg Briefs

How A Hard Landing For China Became A Helicopter Eject Seat For Brazil | ZeroHedge

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Global #Stocks Rebound

Of the 30 country #ETF listed, 18 are above their 50-days, while 7 are actually overbought.  The S&P 500 tracking SPY, on the other hand, is just barely above oversold territory.

See the article online here: Bespoke Investment Group – Think BIG – Global Stocks Rebound

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