REVIEW: DJI (Wall Street), DAX and nuclear options.
I've looked into the DJI and the DAX because they are connected. I also considered events affecting the Hong Kong index. In the text below, I consider China's 'nuclear option'.
Overall I'd say the probability is greater for the south on these indices (from this point in time). But caution - because there is a residual probability for the north and I can't know how far south the markets may go if the markets are with me.
These are very troubled times.
1. The markets are overbought because of QE4.0, lowering of interest rates and high hopes about a China 'Phase one' trade deal.
2. But there is trouble in the Hong Kong Stock market.
3. POTUS signed the Hong Kong Democracy Act which could cause the Chinese to retaliate in some way (nobody knows how).
The 15th of December 2019 is an important date on which $160 Billion of tariffs on imports to the USA, get lumped on China or they are withdrawn. If the tariffs are withdrawn, expect markets to head to the moon (stupidly). If the tariffs are applied, expect a correction of some sort.
Bond troubles
In other trouble China has begun the so called nuclear option of selling off US Treasuries. Note that Treasuries are bonds, which means that money is owed to China by America i.e. they represent a debt owed by the US.
Why would China sell off US Treasuries - which are debts owed to China? Perhaps because China expects the US Dollar to be worth less in times to come. It's like this - if I lend you money fixed in USD value, and then you decide to devalue your US dollar by various means, it means I'm getting back less value. For an exploration of Bonds go here.
China holds about $1.2 Trillion of US debt. A sell off of US Treasuries is said to destabilise financial markets. How - is a separate complex story. The point is that China's retaliation on the Hong Kong Act could be this 'nuclear option'.
The point of all this is that there are complex issues affecting the markets.
Disclaimer: Nothing shared here is investment advice or encouragement to trade in securities. If you lose your money, kindly sue yourself.
Overall I'd say the probability is greater for the south on these indices (from this point in time). But caution - because there is a residual probability for the north and I can't know how far south the markets may go if the markets are with me.
These are very troubled times.
1. The markets are overbought because of QE4.0, lowering of interest rates and high hopes about a China 'Phase one' trade deal.
2. But there is trouble in the Hong Kong Stock market.
3. POTUS signed the Hong Kong Democracy Act which could cause the Chinese to retaliate in some way (nobody knows how).
The 15th of December 2019 is an important date on which $160 Billion of tariffs on imports to the USA, get lumped on China or they are withdrawn. If the tariffs are withdrawn, expect markets to head to the moon (stupidly). If the tariffs are applied, expect a correction of some sort.
Bond troubles
In other trouble China has begun the so called nuclear option of selling off US Treasuries. Note that Treasuries are bonds, which means that money is owed to China by America i.e. they represent a debt owed by the US.
Why would China sell off US Treasuries - which are debts owed to China? Perhaps because China expects the US Dollar to be worth less in times to come. It's like this - if I lend you money fixed in USD value, and then you decide to devalue your US dollar by various means, it means I'm getting back less value. For an exploration of Bonds go here.
China holds about $1.2 Trillion of US debt. A sell off of US Treasuries is said to destabilise financial markets. How - is a separate complex story. The point is that China's retaliation on the Hong Kong Act could be this 'nuclear option'.
The point of all this is that there are complex issues affecting the markets.
Disclaimer: Nothing shared here is investment advice or encouragement to trade in securities. If you lose your money, kindly sue yourself.
Comment:
And now we have a problem
FED balance sheet 42% of GDP @ 2020-01-26. Does money have value anymore? [Different perspective on the virus youtu.be/NjTdvALChwk ]
