Five Hundred Words 11/30/2018

Friday, November 30, 2018

Daily Writing

10:14 AM

Today is the final trading day of November.  Yesterday we exited our short US 10-year Treasury position as it is becoming clear that yields are struggling to keep their head over the 3.00% support level.  Although the historical volatility of the PST exchange-traded instrument was within a tolerable range of 7.00% to 9.00%, the underlying narrative was struggling to hold up after Jerome Powell’s announcement on Wednesday that interest rates are inching closer to a range considered to be “neutral”.

We are focusing on outperforming the SPX benchmark.  Our primary goal into the next year is focusing on exceeding this benchmark.  Our methodology will focus on large-cap, high dividend U.S. equities. We expect portfolio allocation of U.S. equities to fall within 50 – 75%.  At least 60% of portfolio allocation will consist of low beta assets, aiming for below average correlation to the S&P 500 benchmark.

Market Data

 

Resource Commodities

November 30, 2018

November 29, 2018

November 28, 2018

November 27, 2018

Gold Spot

1223.90

1220.70

1214.60

1221.60

Silver

14.285

14.285

14.120

14.190

Gold/silver

85.76

85.39

86.13

85.81

Platinum

818.00

822.00

831.00

842.00

Copper

2.824

2.7955

2.75

2.73

Crude(WTI)

50.52

51.07

51.23

51.58

 

Global Government Bond Yields

November 30, 2018

November 29, 2018

November 28, 2018

November 27, 2018

US 10 year

3.02%

3.02%

3.06%

3.07%

US 30 Year

3.38%

3.33%

3.33%

3.32%

UK

1.36%

1.34%

1.37%

1.39%

Germany

0.31%

0.32%

0.35%

0.35%

Brazil

9.89%

10.05%

10.08%

10.10%

Italy

3.21%

3.22%

3.26%

3.25%

Japan

0.08%

0.08%

0.09%

0.08%

 

Major U.S. Indexes

November 30, 2018

November 29, 2018

November 28, 2018

November 27, 2018

VIX

19.18

NA

18.87

19.41

DOW

253.39

NA

248.33

246.40

S&P 500

273.98

NA

269.61

265.76

NASDAQ

7296.39

NA

7120.56

7081.85

EM USD

1053.73

NA

1048.40

NA

 

Currency Cross Rates

November 30, 2018

November 29, 2018

November 28, 2018

November 27, 2018

USD/JPY

113.5300

NA

113.6300

113.6300

EUR/USD

1.1316

NA

1.1367

1.1326

AUD/USD

0.7306

NA

0.7304

0.7242

USD/MXN

20.226

NA

20.2442

20.623

USD/CNY

6.95557

NA

6.9538

6.9486

USD Index

97.20

NA

96.84

97.15

Five Hundred Words 11/27/2018

Tuesday, November 27, 2018

Daily Writing

8:58 AM

Gold remains rangebound hovering around the $1200 spot price.  The price of gold has not moved outside of $1200 to $1235 per ounce since the middle of August.

Oil has started to hold ground at $51.00/barrel.  We found an informative clip assessing the current oil pricing situation.  In the current environment, which countries have the most impact on the price of oil?  Which events or types of events have the most significant impact on the global price of oil?

German bunds move higher, as the yield on the 10-year bund continues to move lower.  How are German and other European equities performing?  What determines the price of German government bonds?  How much impact does the European Central Bank (ECB) policy have on the domestic monetary policy of sovereign European states?

What sorts of things keep the E.U. up at night?  We know for sure that climate change is one of those things.  We know the idea of adopting a common military is also one of those things.

The yield of the 10-year United States Treasury is hovering around the 3.05% mark. We currently hold a significant position in PST, a 2X leveraged bond ETF. What are the bull and bear cases for bonds?

 

Market Data

Resource Commodities

November 27, 2018

November 26, 2018

November 20, 2018

November 19, 2018

November 16, 2018

Gold Spot

1221.60

1222.80

1224.55

1222.70

1214.50

Silver

14.190

14.250

14.405

14.340

14.270

Gold/Silver

85.81

85.86

NA

NA

NA

Platinum

842.00

841.00

847.00

841.00

840.00

Copper

2.73

2.72

2.80

2.80

2.75

Crude(WTI)

51.58

51.91

56.23

55.66

57.82

 

Global Government Bond Yields

November 27, 2018

November 26, 2018

November 19, 2018

November 16, 2018

November 15, 2018

US 10 year

3.07%

3.07%

3.04%

3.08%

3.09%

US 30 Year

3.32%

3.38%

3.29%

NA

NA

UK

1.39%

1.41%

1.39%

1.42%

NA

Germany

0.35%

0.36%

0.35%

0.36%

0.36%

Brazil

10.10%

9.97%

10.10%

10.15%

10.39%

Italy

3.25%

3.25%

3.60%

3.49%

3.51%

Japan

0.08%

0.08%

0.09%

0.09%

0.10%

 

Major U.S. Indexes

November 27, 2018

November 26, 2018

November 20, 2018

November 19, 2018

November 16, 2018

VIX

19.41

20.78

20.76

18.78

20.04

DOW

246.40

243.64

250.17

254.13

252.42

S&P 500

265.76

265.80

269.10

273.73

271.74

NASDAQ

7081.85

7051.86

NA

7247.87

7247.87

 

Currency Cross Rates

November 27, 2018

November 26, 2018

November 20, 2018

November 19, 2018

November 16, 2018

USD/JPY

113.6300

113.5700

NA

112.8600

112.8300

EUR/USD

1.1326

1.1340

NA

1.1427

1.1415

AUD/USD

0.7242

0.7233

NA

0.7289

0.7332

USD/MXN

20.623

20.399

NA

NA

NA

CHF/USD

1.00187

1.0012

NA

1.0033

0.9996

USD/CNY

6.9486

6.9396

NA

6.9427

6.936

USD Index

97.15

96.98

NA

96.39

96.43

 

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 11/09/2018

Friday, November 9, 2018

Daily Writing

1:05 PM

Markets are down today overall.  The question is whether the past week was a false breakout to the upside or if will see continued momentum higher toward the end of the year.  The price of crude oil continues to drop as we are now retesting February lows.  If crude oil drops below $60/barrel it would have disastrous effects on the U.S. shale industry, as prices need to remain above $60/barrel for the industry to remain solvent.

Bond yields ticked higher throughout the week.  While yields on the 10-year U.S. Treasury note remain elevated, it is not clear if the yield will continue to move higher and eventually break through the 3.25 level for the long term.  Bond yields have been artificially suppressed for quite some time, and it seems reasonable to believe that we could see bond yields move into the 3.50% to 4.00% range, at least temporarily.  Side note: Brazilian U.S. Treasury yields ticked steadily higher throughout the past week.

Market Data

Resource Commodities

 

 

November 9, 2018

November 8, 2018

November 7, 2018

November 6, 2018

November 5, 2018

Gold SPOT

1223.50

1226.10

1226.50

1230.60

1232.20

Silver

14.420

14.540

14.495

14.610

14.715

Platinum

861.00

871.00

867.00

864.00

NA

Copper

2.78

2.72

2.81

2.8034

2.8099

Uranium

28.80

28.90

27.85

NA

NA

Crude(WTI)

60.19

61.60

62.61

63.23

63.49

 

Global government bond Yields (10 year)

 

 

November 9, 2018

November 8, 2018

November 7, 2018

November 6, 2018

November 5, 2018

U.S. 10 year

3.19%

3.22%

3.19%

3.20%

3.19%

Germany

0.40%

0.45%

0.45%

0.42%

NA

Brazil

10.37%

10.31%

10.26%

10.19%

NA

Italy

3.40%

3.41%

3.35%

3.40%

NA

Japan

0.11%

0.11%

0.11%

0.12%

NA

 

 

Major U.S. Indexes

 

 

November 9, 2018

November 8, 2018

November 7, 2018

November 6, 2018

November 5, 2018

VIX

16.87

16.18

18.03

19.84

20.18

DOW

261.49

261.80

257.85

254.52

254.44

S&P 500

277.76

281.01

277.55

273.36

271.89

NASDAQ

7406.90

7570.75

7442.00

7378.25

7356.99

 

Currency Cross Rates

 

 

November 9, 2018

November 8, 2018

November 7, 2018

November 6, 2018

November 5, 2018

USD/JPY

113.7800

113.6800

113.2900

113.2900

113.1600

EUR/USD

1.1315

1.1426

1.1476

1.1407

1.387

AUD/USD

0.7213

0.7292

0.7285

0.7229

0.7204

CHF/USD

1.00590

0.9971

1.0021

0.9964

1.0044

USD/CNY

6.9552

6.9366

6.9165

6.9166

6.9273

USD Index

96.90

96.23

95.87

96.29

96.45

 

Five Hundred Words 11/07/2018

Wednesday, November 7, 2018

Daily Writing

9:21 AM

Crude oil has undergone steep declines over the past few weeks.  What is the reasoning behind this?  The U.S. Dollar index has started to show weakness over the past several weeks as well.  According to experts, the weakness in the U.S. dollar index was expected after mid-term elections reflecting skepticism that the stimulus bonanza, including further tax cuts, that had fueled the dollar’s rally in the first half of the year, would continue under a split congress.[1]

We are eagerly awaiting two new developments from the UK and Europe in the coming days and weeks.  Theresa May has ordered a push for a Brexit deal this week, ordering her attorney-general Geoffrey Cox to prepare a legal solution that would unlock an agreement between the UK and Brussels.  We are keeping an eye on the impact of this week’s development on the GBP and EUR.

The second major development in Europe is also set to play out over the coming days.  The Italian government has until November 13 deadline to submit a re-drafted budget proposal to the Eurogroup.[2]  We don’t really see an easy resolution here, as “Rome’s populist government is standing firm ahead of a November 13 deadline to rewrite plans or escalate its stand-off with Brussels.”[3]

Something new to consider: the price of Uranium hit a 2.5 year high on November 5.  Uranium has been one of the best-performing commodities of 2018, rising more than 40% from its April lows.

According to data recently released by the People’s Bank of China (PBoC) in October, the central bank’s foreign exchange reserves dropped by roughly $32bn on account of China’s push to strengthen the renminbi in the face of potentially disastrous devaluation.  The PBoC is also intent on maintaining foreign currency reserves above $3tn, as these reserves serve as China’s means of suppressing the value of the renminbi.  Official foreign exchange reserves fell to $3.05tn by the end of October from $3.087tn a month earlier.  China’s forex reserves peaked at just under $4tn in mid-2014, but in the following two-and-a-half years the PBoC burnt through nearly $1tn to prop up the renminbi amid a capital outflow surge.

[1] https://www.marketwatch.com/story/dollar-slides-following-midterm-election-results-2018-11-07

[2] The Eurogroup is the recognized collective term for informal meetings of the finance ministers of the eurozone—those member states of the European Union (EU) which have adopted the euro as their official currency. The group has 19 members.

[3] https://www.ft.com/content/197f4ad2-e10b-11e8-8e70-5e22a430c1ad

 

Market Data

Resource Commodities

 

 

November 7, 2018

November 6, 2018

November 5, 2018

November 2, 2018

November 1, 2018

Gold Spot

1226.50

1230.60

1232.20

1232.55

1218.30

Silver

14.495

14.610

14.715

14.77

14.38

Platinum

867.00

864.00

NA

NA

NA

Copper

2.81

2.8034

2.8099

2.8012

2.7501

Uranium

27.85

NA

NA

NA

NA

Crude (WTI)

62.61

63.23

63.49

63.34

65.16

 

Global government bond yields (10 year)

 

November 7, 2018

November 6, 2018

November 5, 2018

November 2, 2018

November 1, 2018

US 10 Year

3.19%

3.20%

3.19%

3.18%

3.16%

Germany

0.45%

0.42%

NA

NA

NA

Brazil

10.26%

10.19%

NA

NA

NA

Italy

3.35%

3.40%

NA

NA

NA

Japan

0.11%

0.12%

NA

NA

NA

 

 

Major U.S. Indexes

 

 

November 7, 2018

November 6, 2018

November 5, 2018

November 2, 2018

November 1, 2018

VIX

18.03

19.84

20.18

19.24

20.96

DOW

257.85

254.52

254.44

254.84

252.42

S&P 500

277.55

273.36

271.89

274.75

271.64

NASDAQ

7442.00

7378.25

7356.99

7407.46

7332.72

 

Currency Cross Rates

 

November 7, 2018

November 6, 2018

November 5, 2018

November 2, 2018

November 1, 2018

USD/JPY

113.2900

113.2900

113.1600

113.28

112.750

EUR/USD

1.1476

1.1407

1.387

1.1385

1.1405

AUD/USD

0.7285

0.7229

0.7204

0.7193

0.7192

CHF/USD

1.0021

0.9964

1.0044

0.9955

0.992

USD/CNY

6.9165

6.9166

6.9273

6.8893

6.9346

USD Index

95.87

96.29

96.45

96.53

96.41