Five Hundred Words 12/05/2018

Wednesday, December 5, 2018

Daily Writing

Market Overview

Markets are closed today for a National Day of Mourning in honor of late President George HW Bush.  Markets will reopen on Thursday.

Investors are still reeling from the sudden 3.00% drop in U.S. equities on Tuesday.  There are indications that China is actively looking to cooperate more with the United States, but there is no telling what that means for the markets when we resume trading at 9:30 AM on Thursday.

Little questions I’d like to answer eventually

  • What does an inverted yield curve mean for the broader economy?
  • The price of palladium has exceeded the price of gold for the first time in 16 years. What does this mean?  Why is this important?  Who does this impact most?  What is the use case for palladium?

China and Trump and America and trade wars, etc.

Following President Donald Trump’s open questioning of China’s commitment to reduce tariffs on US imports, China’s ministry of commerce stated publicly that it is committed to a 90-day timeline to address specific items.

Global markets cheered the weekend accord on Monday, only to reverse course Tuesday as doubts emerged over precisely what the world’s two largest economies had agreed on.

There is no good indication of how markets will respond to news that China’s ministry of commerce confirmed their 90-day commitment to purchase US imports and move to reduce or entirely remove tariffs within 90 days of December 1.

Government Bonds (German ones specifically)

The yield on the German 10-year government bond (also known as “the Bund” has fallen to 0.27%.

Why is this important?

When it comes to bonds, price and yield move inversely.  When the price of a bond moves higher, the yield moves lower.  Declining bond yields in the German Bund (or other comparably safe assets such as U.S. Treasuries) indicate that global investors are seeking safer assets to park their money.  For example, if European investors are starting to feel uncertain about European equities, they may choose to rotate their assets into bonds where they know they can find a guaranteed “risk-free” rate of return.

Here’s what we’re thinking: a 0.27% yield in nominal terms is negative in real terms.  Negative real yield means that once the bond matures, the investor will end of losing money.

If global investors can’t buy their domestic bonds and they can’t buy German bunds, then where do they go?

The clear answer is US Treasury Bonds.  At the time of writing, the yield on the US 10-year Treasury Note is 2.91%.  An important thing to note is that the real yield of U.S. Treasuries after taking long-term inflation into account is just 0.97%.  Compared to the negative-yielding German or Japanese Government Bonds (or even gold) a 2.91% yield is pretty darn attractive.

Miscellaneous items

Brexit

There’s still no Brexit deal.   I’m not entirely in tune with the happenings of Brexit (which from what I understand is likely for the better), but it feels like the indecision surrounding Brexit negotiations between the May government and the EU is fueling more anxiety and fear in the market than a hard Brexit would.  I understand that the issue is far more complicated than that, but that’s just how it feels to me.

We will consider a deeper dive into the Brexit narrative at some point, but for now, we’ll leave it here.

Personal Thoughts

Overall this blog is intended to be an exploration of my thinking and analysis of the world over time.  I hope whatever I write here can be informative for others as well.  My approach is to continually ask questions about things I don’t understand clearly, because of this my writing contains unanswered questions.  I hope moving forward I can develop a community of people who possess a learner’s mindset.  Ideally, those who follow my blog are skilled in areas where I am weak so that I can learn as well.  My sincere wish is to contribute to the thinking of others.

Market Data

Resource Commodities

 

December 5, 2018

December 4, 2018

December 3, 2018

November 30, 2018

Gold Spot

1238.00

1230.30

1228.28

1223.90

Silver

14.505

14.355

14.385

14.285

Gold/silver

85.47

84.84

85.29

85.76

Platinum

802.00

806.00

806.00

818.00

Copper

2.7555

2.8075

2.8571

2.824

Crude(WTI)

52.12

53.25

52.97

50.52

Global Government Bond Yields

 

December 5, 2018

December 4, 2018

December 3, 2018

November 30, 2018

US 10 year

2.91%

2.95%

3.02%

3.02%

US 30 Year

3.17%

3.38%

3.38

3.38%

UK

1.31%

1.31%

1.33%

1.36%

Germany

0.27%

0.28%

0.31%

0.31%

Brazil

10.09%

9.95%

9.82%

9.89%

Italy

3.05%

3.15%

3.12%

3.21%

Japan

0.06%

0.06%

0.07%

0.08%

Major U.S. Indexes

 

December 5, 2018

December 4, 2018

December 3, 2018

November 30, 2018

VIX

CLOSED

16.84

16.04

19.18

DOW

CLOSED

257.53

257.80

253.39

S&P 500

CLOSED

278.34

280.38

273.98

NASDAQ

CLOSED

7158.43

7421.77

7296.39

EM USD

CLOSED

1059.93

1054.71

1053.73

Currency Cross Rates

 

December 5, 2018

December 4, 2018

December 3, 2018

November 30, 2018

USD/JPY

113.2100

112.8100

113.590

113.5300

EUR/USD

1.1344

1.1339

1.1334

1.1316

AUD/USD

0.7268

0.7338

0.7369

0.7306

USD/MXN

20.5130

20.356

20.0611

20.226

USD/CNY

6.8545

6.8342

6.8893

6.95557

USD Index

97.08

96.97

97.02

97.20

Tellier Holdings Apprentice Fund

Wednesday, December 5, 2018

Equities

 

Close

P&L (%)

Shares

Average price

Entry date

BRK B

closed

closed

30

209.505

11/30/2018

KO

closed

closed

83

49.65

11/30/2018

MCD

closed

closed

19

187.43

11/30/2018

SNY

closed

closed

60

45.15

11/30/2018

SBUX

closed

closed

38

66.61

11/30/2018

LMT

closed

closed

6

302.45

11/30/2018

MSFT

closed

closed

15

110.28

11/30/2018

TCEHY

closed

closed

23

39.87

11/30/2018

ETFs

 

Close

P&L (%)

Shares

Average price

Entry date

Franklin FTSE China

FLCH

Closed

Closed

50

22.14

11/30/2018

SPDR S&P 500 ETF

SPY

Closed

Closed

15

274.38

11/30/2018

Cash

 

Close

P&L (%)

Position

Average Price

Entry date

EUR/GBP

EUR/GBP

(-0.04%)

10000

0.89177

11/30/2018

 

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