Gold Reversal
Gold was already strengthening and bond yields sinking on ISM data, then surged when Trump announced tariffs.
For the bond yield picture, please see Bond Yields Crash On ISM Report, More China Tariffs: Inversions Strengthen.
Soybeans down 14.75 is a definite “win” for Trump. What else could it possibly be?
Mike “Mish” Shedlock
While gold was up strongly, the gold miners don’t believe this move upwards. I have found any move by gold that the miners don’t support is just temporary.
what chart are you looking at? HUI up from ~145 in June to over 200 now
Today gold is at $1442 up $22 and higher than it’s been in five years. Meanwhile GDX is at $27.82 down a little today and not even able to match its recent high of $28.25. The miners don’t believe that this gold move is for real and they are usually right.
of course not…..let s buy some more treasuries !
we must be looking at completely different chart. Compare Investec Global Gold fund (shares) with Gold ETF (physical). You’ll see over a 6 month period that the share are up more than the physical
link to markets.ft.com
Over six months, yes but if you look at the GOLDX fund it was down 3.14% today on the same day that physical gold was going through the roof. When the miners don’t go along for the ride, look out below!
GOLDX fund 1st August $15.57
GOLDX fund 2nd August $15.65
So it’s up. At any rate, I prefer longer term trends not day to day noise
Is my basic reasoning on this correct?
World economy slows down which prompts large scale buying of ‘safe’ bonds
demand for bonds is such that yield drop, then turn negative
Negative rate bonds become more common place, so that even junk rated bonds start to have a negative yield
Many of the purchases are by ‘forced’ buyers, such as pension funds, who have a mandate to buy ‘safe’ bonds
BUT, negative yielding bonds means over time, the principal is reduced (or in the case of junk probably lost entirely), so pension funds gradually have less and less money to pay out what was promised.
Either you are forced to raise more from new investors (hiking insurance premiums, more taxation) or you reduce pay-outs for existing pensioners/investors
this is deflationary as it takes money out of circulation
this forces central banks to ease even more in order to create inflation, but lack of good investments takes you back to point 1
Have I got this right? If we are in a vicious cycle of central banks attempting to force inflation vs the behaviour or markets?
The comments are hilarious!
yep, and ‘full’ of lack of content …..like yours for example…
It’ s obvious, one doesn t have to be a pundit to observe and realise that the Sapiens Ape’s dramatically overpopulated globalised system created a unsustainable and practically irreversible mess, a irresolvable financial cesspool and, which is worse, a enormous ecological disaster, neither should we underestimate the increasingly dangerous geopolitical situation especially with a crumbling, armed to the teeth US empire ! Well, at least we had a good time in la-la land for a while, big question remaining when(not if) and how it will end…
The whole debt binge that is the G7 is doing the exact same thing, and getting the exact same results.
Debt is the problem. Too many people living beyond their means. A billion Chinese now want to live beyond their means “like everyone else”, and the G7 is saying “no, only we get to do that”.
Mish has a wicked case of Trump Derangement Syndrome. He used to look at the big picture macro economic trends — the ones that are happening throughout the G7. Now he seems content to whine about Trump. I know Mish is smarter than that, but here we get yet another post about Trump Trump Trump… and he doesn’t connect the dots on the bigger picture.
The G7 has been over-promising for decades. That was already a problem before Trump threw his hat in the ring, and it will be a problem long after he leaves office in 2024 — even if one hates Trump, none of the 20+ clowns currently in the Dem primary are even connected to reality. Saying Trump is a shoe in 2020 is not a compliment to Trump, its a recognition that Dems are so far off the rails that Al Sharpton was trying to talk some sense into them — and Sharpton is a low life street hustler.
Too much debt. Too many empty promises that cannot be kept. True in Italy, where political outsiders agreed on little except that Brussels has to go. True in Germany where voters got tired of Merkel screwing Germany to help Brussels. True in England where they voted to Brexit. True in France where yellow vests continue to protest in spite of how much Macron loves Brussels. That’s four for four EU anchor economies… Japan’s useless politic has been pushing QE/ZIRP for 30 years. Japan has no solution. And neither does ECB or Fed.
And then there is the mess of Canada. They signed the Kyoto accord and then changed their minds when they realized how much their “free” healthcare depends on crude oil and nat gas royalties. And now the native Canadians (whatever native American / indians are called when their reservation is in Canada?) have decided they won’t let Quebec have all the royalties. Will Canada double taxes and keep spewing carbon? Will Canada stop oil production and quintuple taxes (HA HA HA!!)? Or will Canada terminate their “free” health system for the little people? Canadian politicians go south to the USA for immediate care, they don’t wait in line like common citizenry.
Too much debt. Too many promises. Too much government corruption. Its the same problem all over the G7. And now… too many self proclaimed “intelligentsia” so clinically obsessed with Trump that they can’t think straight.
A shoo-in, nothing to do with shoes. Quebec is one of the only provinces that produces no gas or oil, so the natives cannot claim royalties. The American Indians in Canada are called “First Nations”. Free Cdn health care only consumes half as much GDP proportionately as American health care (American health care also has higher administrative/bureaucratic costs than any other health care system in the world) so it’s not dependant on royalties, most of which go to the provinces and not the federal government. The system is funded much the same way that America has FICA withholding on wages (so it’s not free). Oil and gas contribute about B$16 of tax revenue (about half from royalties) of B$665 tax revenue. Even in Alberta it’s only 3.3% of revenue. My suggestion is that your rant is a demonstration of ignorance.
I was thinking faster than I was typing, and typed Quebec when I know Ottowa is the capital. Apologies for my mistake.
As for your numbers on oil royalties… that is your error. Even Wimpy Trudeau has admitted Canada can’t survive without energy revenue (labeling some of it royalties, some taxes, some fees — its all money that oil pays to Ottowa under one label or another). Total oil revenue makes Ottowa go ’round… according to multiple Canadian prime ministers, some of whom claimed otherwise before they got into office and saw the reality.
No, the numbers are based on government publications. The oil sector is important for the Canadian economy, but the royalties and tax revenue has become minor, as the statistics bear out.
Tell it to the last three Canadian prime ministers, many of whom shared your opinion before taking office — only to realize the oil sector was what made Canada’s economy go ’round.
Trudeau isn’t pushing for more pipelines and over-ruling native Canadian tribes because he lost his eco-terrorism membership card. He is doing it because his government needs the money
If debt is the result of everybody living above their means, from who are they borrowing? Consumption can never be higher than present production. Living above your means sounds more like moralism than economic analysis. The oft cited “borrowing from the future” is literally impossible — you cannot transport tomatoes and eggs backwards in time … they have to be present to consume. When corporations swap equity for debt, are they living beyond their means? Nor is the problem that money is running out … money can no more run out than the maximum number of points bringing a baseball game to a halt.
I am the last to say that debt dynamics are unimportant, but that is because the owner of the debt is absorbing the income stream from those assets, not because consumption is higher than present production (which is physically impossible, speaking globally).
Everyone in the G7 is living beyond their means, borrowing from (mostly) OPEC and China. You can’t transport a tomato through time, but a Chinese person can forgo a tomato today so a G7 citizen can eat it today.
Q: What happens when a billion Chinese see the lifestyles of the G7 and also want the same thing?
A: You get a “trade war” as the global economy attempts to force a re-balance. You get that trade war regardless of what Xi or Trump want.
Some people (G7 countries) can live beyond their means, if others live below their means. If everyone tries to live beyond their means, something has to give
You’re taking the term “borrowing from the future” literally here. When you take on debt, you must pay it back with your future productivity. This is what the term means. You can either work and save up to buy something, or you can borrow against your future productivity and pay it back at a premium (interest).
It is in fact very possible to live above your means for a certain amount of time by continually borrowing against your future productivity. The sustainability of doing this is predicated only on your ability to afford the premium of doing so (interest) in the present
You are right that goods cannot be transferred back in time. The way that consumption outstrips production is by consuming existing wealth faster than it is being replaced. It is simply the opposite of saving: spending one’s reserves. Burning capital.
A concrete personal example is owning a car but setting aside nothing to fix or replace it. For a business (or government or society) this might look like taking on debt to remain operational for a time, hoping for more profitable times, but when those don’t come having to default on the debt.
Yes, it’s possible to consume your capital faster than maintaining it. But the point is, as I mentioned, individuals can consume more now borrowing from somebody else’s production against future repayment, but we cannot all do that. That’s why I inserted the word “globally”. It’s important to take “borrowing from the future” literally, because analysis works on univocal and clear analysis of concepts and terms. Using careless analogies focuses attention on the wrong things, which means other things are out of focus: and that is the distribution of wealth and the rerouting of income streams that are implied. We are not consuming too much, but the economy is organized to benefit particular interests at the cost of others.
Future pension benefits must come from future economic production. The problem is not if we have squirreled away enough money (or eggs), but whether the economy of the future will produce enough. This is true regardless of financial structures and (im)balances: whether people have saved little or much, whether the benefits come from personal investment, pension funds, or government schemes, any buying power is predicated on total economic productive capacity.
Would this have anything to do with soybeans?
Almost half of all Chinese hogs were infected/destroyed with swine flu.
The Chinese feed their hogs soybeans.
DT hates those Chinese with a passion lol,even Reagen didn’t hate the soviets the way Mr T hates those Chinese slave masters.Problem is economy too far gone,too diseased by all the money printing to recover,only possible hope is to destroy China (literally)1000% tariff on all there cheap junk.
Destroy the chicom slave state once and for all.
The loser is getting desperate
If trump were to do that it would be primarily Americans who lose. I suspect “lol”s handle references a reasonable reaction to his grasp of economics