Five Hundred Words 11/13/2018

Tuesday, November 13, 2018

Daily Writing

9:44 AM

The yield on the 10-year Japanese government bond currently sits at 0.10%.  Who buys Japanese bonds?  How is it possible for yields to move lower or even be negative?

Oil is down more than 7.00% today.  What is the cause of this?

4:59 PM

There isn’t really anything in my trading that has left me frustrated the past few days, despite the markets continuing to move lower.  I am working on managing my psychology.  I feel scattered much of the time, like there are a million things to do but not enough time to do or even think about everything.  What can I do to continue moving forward?  It takes a lot for me to reveal what I’m thinking inside.  I’m not great at sharing.  Something I learned from reading the analects of Confucius is that no matter what your state of mind, the most basic thing you can share with the world is a positive mindset and attitude.  Smile more.

The markets were flat today overall.  News came out that the UK and EU reached an agreement on principal to move Brexit forward.  Now the UK must bring their proposal to UK parliament for approval.  The whole thing seems like a mess to me.

Market Data

Resource Commodities

 

November 13, 2018

November 12, 2018

November 9, 2018

November 8, 2018

November 7, 2018

Gold spot

1199.98

1209.40

1223.50

1226.10

1226.50

Silver

13.990

14.040

14.420

14.540

14.495

Platinum

838.00

852.00

861.00

871.00

867.00

Copper

2.72

2.69

2.78

2.72

2.81

Crude(WTI)

57.13

60.74

60.19

61.60

62.61

 

Global government bond yields (10 year)

 

November 13, 2018

November 12, 2018

November 9, 2018

November 8, 2018

November 7, 2018

U.S. 10 year

3.15%

3.18%

3.19%

3.22%

3.19%

Germany

0.39%

0.38%

0.40%

0.45%

0.45%

Brazil

10.54%

10.49%

10.37%

10.31%

10.26%

Italy

3.44%

3.43%

3.40%

3.41%

3.35%

Japan

0.10%

0.11%

0.11%

0.11%

0.11%

 

Major U.S. Indexes

 

November 13, 2018

November 12, 2018

November 9, 2018

November 8, 2018

November 7, 2018

VIX

19.45

17.26

16.87

16.18

18.03

DOW

253.21

259.59

261.49

261.80

257.85

S&P 500

273.06

277.24

277.76

281.01

277.55

NASDAQ

7259.66

7309.29

7406.90

7570.75

7442.00

 

Currency Cross Rates

 

November 13, 2018

November 12, 2018

November 8, 2018

November 8, 2018

November 7, 2018

USD/JPY

113.8200

113.800

113.7800

113.6800

113.2900

EUR/USD

1.1292

1.1268

1.1315

1.1426

1.1476

AUD/USD

0.7219

0.7209

0.7213

0.792

0.7285

CHF/USD

0.9929

0.996

1.00590

0.9971

1.0021

USD/CNY

6.9545

6.9631

6.9552

6.9366

6.9165

USD Index

97.16

97.33

96.90

96.23

95.87

 

Five Hundred Words 11/06/2018

Tuesday, November 6, 2018

Daily Writing

9:21 AM

The U.S. mid-term elections take place today.  The outcome is uncertain but there is a strong possibility that the Democrats retake the house of representatives.  This opens the door for Trump impeachment in 2018.  The markets have not fully priced in a democratic agenda for 2019.

Bond yields reflect the health of a state’s balance sheet.  Is this a fair way to approach government bond yields?  Brazil’s 10-year government bond currently yields more than 10.00%.  Will we see lower yields as newly elected right-wing candidate Jair Bolsonaro’s policies begin to take root in Brazil?  Bolsonaro is widely viewed as a right-wing fascist who will be willing to sacrifice capitalism in favor of dictatorship and “rule of law”[1].  At 0.42% Germany’s balance sheet looks quite “healthy”.

Most Asian bond yields are ridiculously low.  Japanese Government Bonds (JGB’s) currently yield 0.12%.  Isn’t this effectively a negative yield?  Why would anyone buy Japanese bonds?  (No one does apparently).[2]

The price of WTI crude has dropped considerably since the start of October.  What could be the cause of this?  Is Saudi Arabia facing heightened pressure to increase demand after the Khashoggi incident?  What is the impact of newly enacted U.S. sanctions against Iran on global oil prices?

Volatility continues to tick downward, with the CBOE Volatility Index falling below 20.00 for the first time since September 2018.  However, things can change drastically tomorrow following the results of the mid-term election.  Our thinking is that the market does not like surprises, if the market is surprised by the election outcome (i.e. Republican victory in the house race), then we could see a considerable spike higher in volatility.

Yesterday European Union Ministers called on Italy’s populist government on Monday to engage in talks with Brussels on a revised draft budget for 2019, backing the European Commission’s view that the plans violate previous commitments by Rome to shrink the deficit next year.  The populist Italian government does not view the EU’s terms favorably.  What does Italy want to include in its budget that the EU is opposed to?  Italy wants to include three things in its budget that fall outside of EU rules: flat tax, reduced retirement age, and citizens’ income.  In its current form, Italy’s 2019 budget deficit will balloon to 2.4% of GDP, well outside the 0.8% cap mandated by EU authorities.  Things could get ugly here if the issue is not resolved.  We are following the deeper impact on the Euro.

[1] https://www.commondreams.org/news/2018/10/29/after-win-brazilian-fascist-jair-bolsonaro-worlds-capitalists-salivate-over-new

[2] https://www.cnbc.com/2018/04/09/something-strange-is-happening-with-japans-bond-market-hardly-anyone-is-trading-it.html

 

Market Data

Resource Commodities

 

November 6, 2018

November 5, 2018

November 2, 2018

November 1, 2018

October 31, 2018

Gold Spot

1230.60

1232.20

1232.55

1218.30

1215.20

Silver

14.610

14.715

14.77

14.38

14.33

Platinum

864.00

NA

NA

NA

NA

Crude(WTI)

63.23

63.49

63.34

65.16

66.35

 

Global Government Bond Yields (10 year)

 

November 6, 2018

November 5, 2018

November 2, 2018

November 1, 2018

October 31, 2018

U.S. 10 Year

3.20%

3.19%

3.18%

3.16%

3.15%

Germany

0.42%

NA

NA

NA

NA

Brazil

10.19%

NA

NA

NA

NA

Italy

3.40%

NA

NA

NA

NA

Japan

0.12%

NA

NA

NA

NA

 

 

Major U.S. Indexes

 

November 6, 2018

November 5, 2018

November 2, 2018

November 1, 2018

October 30, 2018

VIX

19.84

20.18

19.24

20.96

22.72

DOW

254.52

254.44

254.84

252.42

248.75

S&P 500

273.36

271.89

274.75

271.64

267.77

NASDAQ

7378.25

7356.99

7407.46

7332.72

7161.65

 

Currency Cross Rates

 

November 6, 2018

November 5, 2018

November 2, 2018

November 1, 2018

October 31, 2018

USD/JPY

113.2900

113.1600

113.28

112.750

113.240

EUR/USD

1.1407

1.387

1.1385

1.1405

1.1318

AUD/USD

0.7229

0.7204

0.7193

0.7192

0.7086

CHF/USD

0.9964

1.0044

0.9955

0.992

0.993

USD/CNY

6.9166

6.9273

6.8893

6.9346

6.9737

USD Index

96.29

96.45

96.53

96.41

97.13