Five Hundred Words 12/11/2018

Tuesday, December 11, 2018

Daily Writing

Things I’m thinking about

  • How do the best traders structure their days?
  • What are the routines of the top traders?
  • What factors determine bond prices and yields?
  • After the point where the yield curve inverts, how do markets typically behave until recession arrives?
  • What does full conviction feel like?
  • What is the current state of global liquidity?  What are the arguments for global liquidity drying up?
  • What would happen to the UK economy under a ‘hard Brexit’?

Market Overview

Global bond yields continue to tick steadily lower.

China to cut tariffs on imported US cars.

 

What are the causes of the current global slowdown?

What are the causes of the current global slowdown?[1]

A) Much tighter dollar liquidity

  1. US dollar has served as the world’s reserve currency since World War II
  2. All major international transactions are settled in US dollars
  3. Because central banks main reserves are held in US dollars rather than local currency
  4. The Fed is the world’s de facto central bank
  5. When the Fed floods domestic banks with reserves (QE) it increases the domestic monetary base
  6. Increasing US monetary base causes US demand to start growing faster than the rest of the world
  7. This causes the US current account to swell
  8. The result is that the Fed doesn’t only increase the monetary base domestically, but it also increases the monetary base abroad and generally the global monetary base increases
  9. The Fed’s quantitative tightening (QT) policy means global dollar liquidity stopped accelerating earlier this year

B) China

  1. China’s shift began following the 19th party congress is October 2017 when the central government signaled its intent to shift from an economic model heavily reliant on exports to one driven by the services sector and domestic consumption.

Book recommendation

Beyond Blockchain: The Death of the Dollar and the Rise of Digital Currency

By Erik Townsend

 

Market Data

Resource Commodities

 

  December 11, 2018 December 10, 2018 December 7, 2018 December 6, 2018

Gold Spot

1243.10
1245.00
1237.20
NA

Silver

14.495
14.545
14.440
NA

Platinum

783.00
782.00
788.00
NA

Copper

2.7575
2.80
2.7530
NA

Crude(WTI)

51.52
51.58
53.73
NA

 

Global Government Bond Yields

 

  December 11, 2018 December 10, 2018 December 7, 2018 December 6, 2018

US 10 year

2.85%
2.85%
2.89%
2.87%

US 30 Year

3.13%
3.13%
3.17%
3.13

UK

1.21%
1.21%
1.26%
1.24%

Germany

0.23%
0.25%
0.26%
0.23%

Brazil

10.12%
10.12%
9.99%
10.00%

Italy

3.09%
3.09%
3.14%
3.20%

Japan

0.03%
0.03%
0.05%
0.05%

 

 

 

Major U.S. Indices

 

  December 11, 2018 December 10, 2018 December 7, 2018 December 6, 2018

VIX

21.91
23.95
22.42
23.53

DOW

245.09
243.61
24918.82
247.27

S&P 500

267.45
263.37
269.45
265.97

NASDAQ

7041.83
7041.83
6994.39
7114.10

EM USD

NA
1062.41
1059.54
1060.39

 

Currency Cross Rates

 

  December 11, 2018 December 10, 2018 December 7, 2018 December 6, 2018

USD/JPY

NA
113.1800
112.6900
112.4800

EUR/USD

NA
1.1358
1.1384
1.1389

AUD/USD

NA
0.7188
0.7227
0.7224

USD/MXN

NA
6.8730
20.338
20.494

USD/CNY

NA
6.9127
6.882
6.8815

USD Index

NA
97.18
96.80
97.00

[1] Juliette DeClercq, JDI Research, as featured in Macrovoices

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