2017-09-25

2017 Picks: A Mixed Bag

At the end of 2016 I made a few predictions for 2017.

I thought Turkey and Mexico (TUR and EWW) would decline. I missed the broader emerging market trend and the extent to which the U.S. dollar would correct, although in Turkey's case, the rally is almost entirely driven by equities, not currency.

I thought FCG was a good speculation at the end of 2016 considering it was very cheap relative to the energy sector. I thought it would at least perform no worse than energy, but it underperformed again. Still, it did not hit a new relative low versus SPDR Energy (XLE). FCG's relative low was achieved in early 2016. I still like it as a relative bet on energy for anyone who is bullish on energy. I make no call on the overall energy sector; I currently own November puts on SPDR Energy Exploration & Production (XOP).

I was right on the solar (TAN) call. And the Chinese yuan.
In the near term, the Chinese yuan looks a little oversold. I expect a bit of a rally after it cracks 7, even better if it rallies before since it will catch the bears. A 3 percent rally takes USDCNY to about 6.75, a 5 percent rally to 6.60. The PBoC has given bears nice entry points before, hopefully they provide another one. I don't think USDCNY will be the best currency play.
It ran all the way to USDCNY 6.48 on September 8. On September 10, I wrote: Time to Short the Yuan? USDCNY hit 6.62 today.

Kurds Vote on Independence

More bad news for Turkey.

CNN: Iraqi Kurds cast their votes in historic referendum
Iraqi Kurds have started casting their ballots in a controversial independence referendum Monday as tensions between Iraq's largest ethnic minority and the Iraqi government in Baghdad intensified.

Voting got underway at 8 a.m. local time (1 a.m. ET) and will end at 6 p.m. local time (10 a.m. ET). The first results should be known within 72 hours.

...Both Iran and Turkey have sizable Kurdish minorities and fear a vote for independence in Iraq might galvanize movements in their countries.
One of the more realpolitik solutions for Islamic terror was to blow up the entire Middle East via Kurdish independence, forcing jihadists to fight internally.

TUR broke out of the head-and-shoulders pattern, but it remains in a downtrend. I expect the rally in 2017 will prove to be a headfake.

2017-09-24

Third-Tier Cities Tighten Real Estate Regulations

iFeng: 七地发楼市新政 多限新购房再上市
Another wave of market regulation policies, and shift focus from a second-tier cities to second and third tier cities. September 22 to 23 in the afternoon, there have been Nanchang, Xi'an, Chongqing, Nanning, Changsha, Guiyang, Shijiazhuang 7 cities introduce new market regulation policies, Chongqing, Nanchang, Nanning, Changsha, Guiyang, Shijiazhuang 6 cities are new then make a limited purchase of housing on the market, ranging from 2-5 years time.

Asia-Pacific Urban Development Branch President Chen will keep the real estate yesterday in an interview with Beijing News reporter, he said that second-tier cities housing prices rose significantly, intensive introduction of restrictions on sale and other control measures, mainly in order to curb price gains.
Xinhua interprets: 新华社:2天8城楼市调控加码,释放什么信号?
So why these eight cities to be overweight regulation? Industry insiders believe that this round of regulation with a precision, "where prices rose significantly, points to where the regulation."

Reporters noted that this regulation to raise the capital city does not belong to more than 15 first- and second-tier cities hot spots, but recently a new round of price and trading volume rose city. These cities are mostly net inflow of population, there is upward pressure on prices, regulation of further tightening reasonable.

..."To give the market a clear signal that the market regulation will not relax for a period of time, will help guide market expectations." President Yang Research Institute is now home chain collar said.


Keer Rui Research Center analyst Yang Kewei that the impact of policies on the demand side restricted the biggest change is that the previous "urgent urgent buy sell" short-term psychological hold, by reducing transaction frequency, eliminating the short-term profit mentality, in order to curb investment speculative demand, in line with the central "room to live not fried" spirit.

Yang Kewei is expected in the short term, it will result in restricted or down real estate turnover, with elongated period of regulation, the possibility of some local developers to cut prices to take the amount of the increase is expected to more projects will accelerate the market.

Good Political News Peaks In Europe

Germany's high water mark in social mood sees the two major parties losing support and the populists rising. Since CDU refuses to partner with AfD and SPD refuses to partner with CDU, the only possible coalition is between CDU, FDP and Green, the "Jamaica" coalition (named for the three party's colors matching the flag of Jamaica).

This also marks the peak of a string of positive election results since Brexit. The road ahead is much less favorable with Italy on tap and Spain heading towards major internal conflict. The Catalonian indepedence vote is in October. The next big national election is in Italy, where right-wing and populist parties dominate the polling.

Reuters: Italy's 5-Star names youthful new leader as election nears

Guardian: The view from Madrid: anger and sadness as Catalans prepare for vote

Germany held Europe together, but if Merkel is as weakened as she appears, she will have a difficult time forcing austerity on Europe because she will need to keep the Greens happy to stay in power.

2017-09-22

AfD Could Become Largest Opposition Party in Germany; Catalonia Crackdown in Spain

Alternative for Germany (AfD) is currently polling in third place ahead of Sunday's election.

German election 2017: Polls and odds tracker as Merkel seeks fourth term as Chancellor

German social mood is among the strongest in Europe, yet the anti-immigration populists are moving into the pole position for opposition against what could be a "grand coalition" between the center-right and center-left parties. When social mood has its next leg down, the centrist parties will collapse and the leading opposition parties will take power.

Meanwhile in Spain, where social mood is already negative, the secessionist movement in Catalnia is spiraling towards Exit.

ZH: Unintended Consequences & Ugly Repercussions: It's Getting Worse In Catalonia
But, as WolfStreet.com's Don Quijones points out Madrid’s crackdown on Catalonia is already having one major consequence, presumably unintended: many Catalans who were until recently staunchly opposed to the idea of national independence are now reconsidering their options.

A case in point: At last night’s demonstration, spread across multiple locations in Barcelona, were two friends of mine, one who is fanatically apolitical and the other who is a strong Catalan nationalist but who believes that independence would be a political and financial disaster for the region. It was their first ever political demonstration. If there is a vote on Oct-1, they will probably vote to secede.

The middle ground they and hundreds of thousands of others once occupied was obliterated yesterday when a judge in Barcelona ordered Spain’s militarized police force, the Civil Guard, to round up over a dozen Catalan officials in dawn raids. Many of them now face crushing daily fines of up to €12,000.
Spain offered some concessions to Catalonia, similar to those given to the Basque region.
Catalans want a new constitution to replace the one adopted in 1978 following the death of longtime dictator Francisco Franco and a statute like the one in place in the northern Basque Country which collects its own taxes and contributes little to Spain's central coffers, Bartomeus said.

Juan Montades, a political scientist at the University of Granada, said that if the rules are changed, Andalusia, Spain's most populous region which benefits from the redistribution of wealth from Catalonia, has warned that it would "be in the front line to defend its interests."
The battle in Spain is strong because Catalonia is wealthy. It is more leftist than the rest of Spain. It also has a long and unique regional history, including local dialect. The last part is the most important for most secessionist movements.

Meanwhile in America, getting a raw deal (or seeing that the future is set) is enough to propel separatist movements such as the American Revolution and Confederacy in 1861. American secession seems laughable with social mood at a bear market peak, but #CalExit is getting off the ground. Many residents in California are foreigners, recent immigrants from all over the world, but mostly from South and Central America. This doesn't create ethnic unity, but it adds a layer of ethnic separation from the rest of the country on top of political and economic issues.

Furthermore, blue states such as California are the strongest opponents of secession and devolution of powers favored by red states. Both left and right will see themselves as winners if California leaves. Although negative social mood and hateful rhetoric will fuel a separation, it is more likely to be amicable given the political background. The risk is that other blue states such as New York threaten to leave as well because the country will move right, and then blue states such as Washington, Illinois, New York threaten to kick out the blue cities such as New York, Seattle and Chicago, turning the states as red as the Deep South.

2017-09-19

Beijing Banks Raise Mortgage Interest to 20pc Premium

iFeng: 央行北京营管部:支持北京房贷利率调整
According to Securities Daily informed that since September 14, a number of banks in Beijing the first suite of lending rates continue to rise, after the adjustment, the first suite of mortgage interest rates go up 5% to 10% into the mainstream, while individual banks adjusted to the lowest performing reference interest rates go up 20% of the interest rate policy, there are more outlets of individual banks first suite collective "pause orders."

"Securities Daily" quoted the news that the number of real estate agent, has been notified of two state-owned big firms, September 14 started the first suite of 5% of the lowest floating interest rate policy; at the same time, the implementation of individual banks adjusted to the lowest benchmark interest rates go up 20% of the interest rate policy; as well as the first suite of individual banks to suspend orders.

New Home Prices Rise 0.2pc in August

Although prices rose in 46 cities last month, the number of cities seeing price declines jumped to 18 as the average increased fell to 0.2 percent. Existing home prices increased 0.3 percent, with 54 cities seeing rising prices.

Recent months still saw large single month prices increases, but that wasn't the case in August. Guilin and Harbin saw the largest increase in new and existing home prices respectively, both rising 1.1 percent.

2017-09-18

Everything is Destroyed, Even the Dreams: Huobi, OKCoin Executives Told to Stay in Beijing

iFeng: 火币网、OKCoin负责人、高管被要求不得离京
A number of informed sources, the current Bitcoin trading platform each person in charge, and so not to leave Beijing executives to cooperate with the investigation. In accordance with regulatory requirements, the trading platform for shareholders, actual controllers, executives, such as chief financial officer during the cleanup exit to fully cooperate with relevant work in Beijing.

The industry believes that, with the two virtual currency trading platform shut down all operations, is expected to Bitcoin prices will fall. However, now with the basic out to do bad, investor sentiment being stable, Bitcoin stabilize prices for the time being. As of press time yesterday, reporters, Bitcoin prices declined slightly, quoted near 19,000 yuan.