Financial topics

[thomasglee]

By the way, Thomas, what do you think about what's going on in Korea?

I chock-up the recent events to the economic turmoils of China. I believe the north is trying to set the stage to gain international aid in return for peace. The north knows that with China's economic decline, they will suffer most. When China gets a cold, north Korea gets the flu.

[John]

> By the way, Thomas, what do you think about what's going on in
> Korea?

> I [chalk] up the recent events to the economic turmoils of China.
> I believe the north is trying to set the stage to gain
> international aid in return for peace. The north knows that with
> China's economic decline, they will suffer most. When China gets
> a cold, north Korea gets the flu.

That's a great insight. Thank you.

[aedens]

https://twitter.com/nanexllc/status/636 ... 92/photo/1

futures banned in moa land
52 Wk Low 15.48 - 52 Wk High 44.6 vxx

China's share market got destroyed again Tuesday.

analysts cut price targets on 11 other stocks.

Higher Cost of Equity:Columbia Pipeline Partners (CPPL) Kinder Morgan (KMI), Magellan Midstream Partners (MMP),
and Summit Midstream Partners (SMLP).

Reduced Distribution/Dividend Outlook: Plains All-American Pipeline (PAA) to $38 from $52 and Plains GP Holdings (PAGP) to $23 from $29.

Valuation Change: Spectra Energy (SE) to $31 from $36.

Higher Cost of Equity and MVCs: Williams Partners (WPZ) to $40 from $51.

Lower Frac Volumes/Lower Export Earnings: Targa Resources Partners (NGLS) to $37 from $44 and Targa Resources Corp. (TRGP) to $71 from $95.

Rising Debt Level: National Fuel Gas (NFG) to $65 from $69.

Ticker Name WTD Return YTD Return Yield
RNF Rentech Nitrogen Partners LP 46.80% 50.14% 26.46%
AMID American Midstream Partners 46.67% -21.37% 13.42%
PTXP PennTex Midstream Partners, LP 23.40% -3.57% 5.94%
USDP USD Partners LP 23.23% -11.54% 9.94%
ATLS Atlas Energy Group LLC 23.08% -59.43%
AZUR Azure Midstream Partners LP 16.04% -38.20% 14.61%
VNOM Viper Energy Partners 15.23% -7.00% 5.43%
TCP TC Pipelines LP 14.70% -15.56% 6.18%
NAP Navios Maritime Midstream Partners LP 13.31% 30.05% 11.33%
SUN Sunoco LP 13.03% -16.02% 6.95%

http://mlpdata.com/mlps

https://www.youtube.com/watch?v=1Z4uITELiqw

[Higgenbotham]

spx.gif (42.59 KiB) Viewed 2760 times

[Higgenbotham]

The chart above shows the 3 recent bubbles that have taken place in the US stock market.

All 3 bubbles have the following initial features:
1. A pre-crash event 1 or 2 years before the top of the bubble. This is shown by the first blue line.
2. Formation of the bubble.
3. 200 day moving average begins to turn down. This is shown by the short thin red line above the top of the gold 200 day moving average where the 200 day moving average is turning down from its peak.
4. First break of the bubble. This is shown by the second blue line.
5. Failed attempt to bring the bubble back. This is shown by the third blue line.

The third bubble then deviated from the first two. When the third bubble was due to crash in the same manner as the first two (shown by the first purple line), instead the Central Bankers of the world engaged in a coordinated effort to blow a massive bubble which did not occur the first two times.

The second purple line shows a projected path for the bursting of this coordinated bubble. There are 800 points of excess in this coordinated bubble (from 1300 to 2100) compared to the first two bubbles (which were also greatly in excess when they were at the equivalent of 1300).

One obvious question would be why wouldn't the bubble just crash down to the level of 500 where it would have crashed to if the coordinated bubble hadn't been blown. Probably because in the intervening time that the world's Central Bankers have blown this coordinated bubble, the underlying problems have worsened. Therefore, the crash will not stop at 500 and may only stop at zero or when it is decided to permanently shut the markets.

Another obvious question is where are we at compared to the first two bubbles. Probably in unprecedented territory. There is no comparison that can be made. This can be seen by the fact that there was a huge move down right from the top of this bubble whereas that did not happen from the tops of the previous two bubbles.

[Higgenbotham]

At the top of the previous bubble oil hit a peak of $147 per barrel. This happened in the summer of 2008. Oil has been falling ever since. Despite the efforts of the world's Central Bankers to inflate, oil has fallen and fallen. Meanwhile the cost to produce oil has risen and risen due to those efforts to inflate.

There has been a lot of bravado the past couple weeks in the national mainstream media talking about the great American oil renaissance and how American capitalism is so great that domestic oil producers can profitably produce oil in the 30s. Meanwhile we can turn to the local papers like the Houston Chronicle to get the real story on the ground. It can be readily seen that the national mainstream media is lying.

Based on the real reports on the ground, we can see that the growth of production of the lifeblood of the world economy is no longer possible because the world's Central Bankers blew a bubble wherein the price of oil could not rise but the costs to produce oil surely did. At the same time, the coordinated bubble that was blown was at the expense of the working person who buys the bulk of the world's fuel and their ability to afford to buy fuel. With this lower affordability, the price of oil could not rise.

It is due to factors like this that the crash will take the stock market below the level it would have gone to had the Central Bankers not blown the coordinated bubble. Therefore, I do not believe the crash will stop at 500, for example, but will have to stop at a price lower than 500 or even not stop before the markets go to zero or are shut.

[John]

> Another obvious question is where are we at compared to the first
> two bubbles. Probably in unprecedented territory. There is no
> comparison that can be made. This can be seen by the fact that
> there was a huge move down right from the top of this bubble
> whereas that did not happen from the tops of the previous two
> bubbles.

I believe that the current bubble is fundamentally different from the
earlier two bubbles. The earlier bubbles, as well as the 1929 bubble,
were entirely internal to the United States -- the 1920s Wall Street
bubble, the 1990s tech bubble, the 2000s real estate/credit bubble.

But today's bubble is largely exogenous. Yes there's a Wall Street
bubble, but this time Wall Street is heavily interlocked with stock
markets and financial centers around the world, and the Wall Street
bubble is smaller than all the other bubbles put together.

I understand that total debt in the United States is $60 trillion, of
which $18 trillion is federal government debt. I've also heard that
total debt in the world is $250 trillion. So, once again, the debt
exposure of the United States is big, but only a small fraction of the
world debt, in countries with whose economies are interlocked with
ours. That means that if almost anyone else sneezes, then we catch a
cold.

I've been trying to explore some of these concepts in the currency
area, when I've been writing about the devaluation of the Chinese
yuan, then the Afghanistan tenge, and then various African currencies.
These actions have all strengthened the US dollar, making the US goods
and services less competitive in the world.

This week there's been some big news that China is selling off over
$100 billion of US Treasuries. This will strengthen the American
dollar even more, possibly significantly. This is possibly the best
explanation for the huge move down right that you mention. This would
be an example of how the current situation is significantly different
from previous ones, because today we're reacting to exogenous events,
not internal ones as in the past.

[vincecate]

This week there's been some big news that China is selling off over
$100 billion of US Treasuries. This will strengthen the American
dollar even more, possibly significantly.

If China sells them and the Fed buys them with new dollars, then the interest rates might stay the same but the quantity of dollars would go up. If the quantity of dollars go up we should expect the dollar to weaken.

If China sells them and Cayman (or any other country) buys them it does not change the amount of treasuries or the amount of dollars but it could change the interest rate on treasuries. If it is a fire sale, the price of bonds could go down and interest rates up.

It would kind of depend on what happens next. If people are worried that China is going to keep selling and bonds would keep going down, others might sell their bonds too. If lots of people are selling I would expect the Fed to be buying with new dollars. So again the dollar would go down.

Time will tell. I think the next 12 months will be exciting.

[John]

> If China sells them and Cayman (or any other country) buys them it
> does not change the amount of treasuries or the amount of dollars
> but it could change the interest rate on treasuries. If it is a
> fire sale, the price of bonds could go down and interest rates
> up.

If China sells Treasuries, then China is adding to the global demand
for a fixed supply of dollars, which increases the value of dollars.

[Higgenbotham]

If China sells Treasuries, I think the initial move in this environment would be for the dollar to go up. The reason is that China is selling Treasuries because their economy is weak. On the other hand, let's say the Chinese economy was quite strong and strengthening and they made a decision to sell Treauries because the US economy is weaker than the Chinese economy. Then I think the immediate reaction to that announcement would be for the dollar to go down.