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the end of apple

What’s Really Driving Apple?

Narratives are a fundamental part of our human existence. They’re the key to how we process information. Just as the mind instinctively searches for visual patterns in nature, it also seeks to derive patterns and meaning from information flow. We create stories to help us understand.

We see this in financial markets all the time, though it’s not always a good thing. You’ve heard the talking heads on CNBC. They hop on camera and try to attribute every little market gyration to one news story or another. This type of narrative creation doesn’t make much sense. Most of the day-to-day movement in the markets is just noise.

But pull back a bit and you can see where narratives become useful. For example, why has gold been on a tear since the beginning of the year? Its narrative revolves around the loss of faith in central banks. Investors have stopped believing in their ability to support and stabilize markets and the currency. And so they turned to gold for safety.  Read more

China’s Deflationary Renminbi Devaluation

The 4 Horsemen Of The Global Deleveraging Apocalypse Part I : China’s Renminbi Devaluation

This is part 1 of our 4-part series on the global deleveraging which is now beginning and is expected to last over the next 2 to 4 years. We anticipate a lot of pain for the global economy in the form of crashing security markets and depression-like economic conditions. This series will cover how we believe this crisis is likely to play out. We will not only help you understand what’s going on, but we will show you how to protect yourself from the coming economic turmoil. We’ll even show you how you can profit from it. Enjoy part 1 below: China’s Renminbi Devaluation.

 

“Declaring war on China’s currency? Ha ha.” That’s the interesting title of a recent article published by the People’s Daily (official newspaper of China’s Communist Party). It serves as a warning to legendary fund manager, George Soros, against shorting the Chinese renminbi. (Side note: China’s currency has two names, the Yuan and Renminbi, they are interchangeable.) Read more

Long Bonds: A Safe Haven In Volatile Markets

Long Bonds: A Safe Haven In Volatile Markets

  • Long dated US treasuries do well in times of market volatility and provide their best returns during bear markets.
  • US debt is viewed as a safe haven when markets are in turmoil and investors flood into them.
  • Recessions are deflationary and inflation expectations plummet. This increases the expected real return on bonds.
  • Lower growth and lower inflation lead to a lower federal funds rate. This rate is transmitted throughout the yield curve and results in lower yields across multiple durations.
  • A potential ease in selling pressure from China will also help propel bonds higher.

Read more

Singapore Can’t Escape The Asian Currency Wars (Long USD/SGD)

  • The yuan devaluation will put upward pressure on USD/SGD.
  • The MAS must react to keep their economy from contracting.
  • Singapore is very vulnerable to currency shifts due to a large import/export market.

Singapore, an economy known for its disciplined monetary and fiscal policy, has managed to get caught in the crossfire of a currency war with no easy way out.

Ever since Abenomics, Asian currency wars have been a dominant theme for macro investors. A currency war begins when one country decides to devalue their currency in order to stimulate export demand. But neighboring countries with stronger currencies have a harder time competing for exports so they begin to devalue as well. What ends up happening is a “race to the bottom” where both countries end up devaluing their currencies into oblivion in order to stay competitive in the global marketplace. Read more

Extremely Important News Just Came Out Of China – Here’s How To Play It

Important market news came out this weekend, and surprisingly (or perhaps not so) it has received little notice. I’m talking about the PBoC’s statement released Friday, signaling that they are looking to break the peg to the dollar and rebalance against a currency basket. Here’s the news, via The Financial Times:

China has paved the way for a further weakening of its currency by announcing changes in how it measures the renminbi’s value.

As markets gear up for next week’s Federal Reserve meeting, the People’s Bank of China signaled it would measure the level of the renminbi (or yuan) against a basket of currencies rather than just the US dollar.

The move, announced on Friday, has raised investors’ alarm at the prospect of a new currency war – just as the US prepares to raise interest rates.

Readers who follow us at Macro Ops knew that this change was coming. Read more