Three weeks ago my currency of the week was the HKD.
Just to update the chart from three weeks ago - we are now inches from the level the HKMA has defended relentlessly. So we are about to see another defense of 7.85 or Hong Kong is going to allow the currency to slip lower. Either way it will be interesting. There is a clear trade here thanks to the line in the sand.
Three weeks ago in Volume 15, I wrote a lot about China, including about the property market. In this passage I wrote about share pledges, real estate prices, and the macro impacts of Chinese real estate. Since, we have seen this story about share pledges in the FT as well this article about Beijing pre-owned property prices falling 7% YoY - the worst numbers in a decade.
The biggest takeaway from Chinese real estate in my opinion is does the government pump property again to give the economy a shot in the arm at the expense of strategic goals and escaping the middle income trap? - Or do they stand strong in the face of a weak economy with angry pressure groups and citizens and allow the bubble to burst in hopes to truly de-risk for long term gain. Place your bets and watch real estate closely.
Welcome to my new blog "3WA" which stands for Three Weeks Ago. I will highlight one point I discussed in The Cascade and comment on what has changed over the past three weeks and what it means. This week I will cover base metals.
Three weeks ago in The Cascade Volume 14 - I highlighted $DBB - the base metals ETF. At the time of writing the price was right at a crucial horizontal level as well as at the 200 week moving average.
Here we are three weeks later and price is still right at its horizontal level and the 200 week moving average after a flash down a couple of weeks ago into a demand level. When zoomed in, price is currently under the 200W by a few cents as of now.
Much of this price action has been driven by copper, which is fighting against a slowing China and slowing global growth.
As you can see, copper is at a crucial horizontal level after a violent dip lower, which tested the 200W. Markets have been bombarded with Chinese stimulus headlines over the past couple of weeks which may be lending some support to copper prices - but it appears to me that the amount of stimulus and where it is directed is unlikely to create enough demand to overcome the slowing of the global economy - especially in China.
That is all for this week and the first 3WA.
To those that have recently found my work, thank you for reading what I have to say. I started this site as a blog where I posted long form posts on macro subjects about once per month - often with some tactical trading ideas mixed in.
I then started the White Mountain Letter and blogged a bit less - sending out a new letter every couple of weeks.
This fall I started Pinecone Macro Research and started selling premium research to the kind of people that enjoy reading 20-30 pages ever Monday morning on global macro. Ever since I started the business, I have been quite busy and have completely neglected the blog and have not written too many White Mountain Letters.
My priority is my paying clients and I will never cheat the work I put in on The Cascade and The Emerald, but I want to keep the blog and free letter going - improving engagement with the folks that enjoy my work but do not need in-depth research.
Moving forward I aim to write a blog post (they will be much shorter than in the past) and send out a free letter or special report like the oil/super cycle report I just sent out, at least every month or two. So look for some blog posts and some White Mountain Letters in the future.
Every free letter I have written is available as a PDF under the White Mountain tab and if you want to learn more about my premium research just hit the middle tab.
I am back to work next week and hopefully back to writing regularly. My last article laid out my expectations for the bond market (really global bond markets) to break down this year as inflation became the story. For the most part this has started to happen and my bond shorts have paid me. With that said, I think this party has just started and despite perceived bearishness and even extreme positioning in bonds to the short side - I feel like nobody sees what is actually coming. Most bond "bears" I have talked to expect a big move down in yields soon as bonds are oversold or do not expect this story to really take hold for another year or so. I still do not know many folks who think a strong and secular inflation is possible. Also, most investors still expect weakness any moment and a strong dovish Fed response which will take yields much much lower.