Dear Reader, After breaking out to fresh new highs last week, the Aussie market is set to fall sharply today. The reason? US President Trump said he would impose tariffs on all steel and aluminium shipped into the US from Brazil and Argentina. In Trump’s own words, via Twitter: ‘Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers. Therefore effective immediately, I will restore the Tariffs on all Steel and Aluminium that is shipped into the US from those countries. ‘The Federal Reserve should likewise act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies. This makes it very hard for our manufacturers and farmers to fairly export their goods. Lower Rates and Loosen — Fed!’ This pretty much encapsulates Trump’s economic policy. He’s trying to bring back trade related jobs to the US. To do so, he needs a competitive currency. But with the US competing against economic basket cases and socialists (Europe) and communists (China), capital is going to flow into the greenback, isn’t it? To see what I mean, take a look at the US dollar index. It shows the performance of the US dollar against its major trading partners. As you can see, the dollar bottomed in early 2018 and has been in a bull market ever since. That’s a reflection of global capital flowing into the US. It’s the strongest economy in the world. The problem for Trump is that a strong dollar is not helping him boost exports. It’s making a range of industries uncompetitive with the rest of the world. Hence his constant pressure on the Fed to loosen interest rates. He wants a weakened dollar, and damn the consequences. That’s why Trump uses tariffs as an economic weapon. Tariffs are a way of evening out the playing field when you can’t manipulate your currency. Trump’s economic policy has some major big picture implications. The whole structure of the post-war global economy developed from the US being a consumer of last resort. The US consumed Europe and Japan’s exports, making those economies highly productive. Now it consumes China’s exports. ..............................Advertisement.............................. ..........................................................................
To pay for these exports, the US issues debt. This debt finds its way into foreign central banks. Because the US dollar is the world’s reserve currency, this debt becomes a reserve asset in foreign banking systems. It allows for the creation of more credit. US trade deficits then, are a mechanism to create liquidity for the global economy. That’s not going to end anytime soon, mind you. The US trade deficit is structural. It’s running at around $200 billion per annum. But Trump wants to reduce it by increasing the US’ export competitiveness. That’s a longer-term project. But his determination to use tariffs to even the playing field tells you he is serious about achieving it. Shorter term though, let’s take a look at the markets… They have been on a tear this year. But they’re again stretched. We could be in for a decent correction here. Let’s take a look at the S&P 500 first… It broke out to new highs in late October. It’s been a bullish move. But it wouldn’t surprise me to see a correction take the index back to around the breakout point. That would be a retrace of approximately 4.5%. That’s hardly a major correction. If support came in at that level, the upward trend would remain intact and the market would still be in a bullish position. What about the Aussie market? Here is a chart of the All Ordinaries… It broke out to a new all-time high last Wednesday. The move lagged the US by over a month. Now, it looks like its falling sharply, and therefore potentially rejecting that move. That could set us up for another sharp correction like we saw in early August. While it felt nasty at the time, it’s important to note that it didn’t result in a change of trend for the overall market. I use 50- and 100-day moving averages to give me a sense of the medium-term trend. When they cross to the downside, it indicates that the trend could be in the process of changing. That hasn’t happened since October last year. So it’s important to keep in mind, if the market corrects in the days and weeks ahead, that the overall trend is more important than the daily price moves. With the US Federal Reserve back pumping money into financial markets (but it’s not QE) and the RBA threatening QE, stocks are likely to remain supported on any decent pullback. So don’t become too bearish until you see more definitive signs that the trend of the market is changing. Regards, | Greg Canavan, Editor, The Rum Rebellion |
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There Is No Climate Emergency By Viv Forbes Leaders of the Clintel Group of world scientists and professionals will attend the UN Climate Change Conference (COP25) which starts in Madrid today (2 December) and runs for 12 long days. (The Climate Summit was shifted suddenly to Spain after Chile cancelled because of violent riots in Santiago.) Clintel will present their ‘No Climate Emergency’ petition at the Climate Reality Forum. This petition has already been presented to the UN Secretary General, the European Commission and the European Parliament. Voting on a motion promoting a climate emergency declaration (in opposition to the Clintel statement), over one third of the members of the EU Parliament voted for ‘No Climate Emergency’. This shows there is a significant opposition to alarmism, even in the EU. The Climate Summit is expected to attract up to 25,000 high-flying delegates and hangers-on from 197 member countries. Most will not arrive using bicycles, sailing boats or gliders — they will burn hydrocarbons. Desperate to spread their ‘Climate Emergency’ alarmism, delegates will try to force high energy costs and rationing on us while they waste it conspicuously themselves. Clintel says that computerised global temperature simulation models are unfit for the purpose of setting climate policies — they have consistently run hot for 20 years. The real global climate has warm and cold cycles. Current global temperatures are about as warm as the Medieval Warm era (which was followed by the Little Ice Age). There is no uniform global temperature at any place or any time, and no one knows what ideal temperature we should aim for — the Frigid Zone would probably like it warmer, the Torrid Zone would probably like it cooler. We need to take heed of climate history and energy realities, both neglected in alarmist/UN propaganda. Too many UN ‘scientific’ reports are tinkered with by officials before release, and are designed to alarm rather than inform. For too long we have been forced to listen to biased academics (chasing research funds), energy speculators (chasing government subsidies and tax breaks), alarmist journalists (chasing sensations), noisy children (chasing days off school) and greenish politicians (chasing votes). It’s time to stop the chasing. We need a grown-up debate allowing all sides to present their science on ‘Man-made Global Warming’. CLINTEL says ‘There is NO Climate Emergency’. Regards, ..............................Advertisement.............................. How to Build a Wealth ‘Storm Shelter’ for a Crash If you sense that the markets are at some kind of tipping point, you need to read this vital book right now. According to Vern Gowdie, what we’ve seen in recent weeks is just the beginning. But the government and the financial sector are not sounding the alarm. Their advice is that this is a ‘healthy correction’…and to continue investing into stock, property and bond markets. But markets are threatening to unleash the financial equivalent of a Category 5 cyclone. Vern’s book shows you how to build a ‘stay indoors’ investment portfolio. It’s a certain asset allocation that is custom-designed to weather the coming downturn, which Vern labels the ‘Long Bust’, while it plays out. To download your copy of his book, click here. | ..........................................................................
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