David Fuller and Eoin Treacy's Comment of the Day
Category - General

    The Bond Market is the Biggest Bubble of our Lifetime

    Thanks to a subscriber for this interview of Louis-Vincent Gave which appeared in themarket.ch. Here is a section:

    On a global level, bonds with a value of about $15 trillion currently trade with a negative yield. What’s going on here?

    For every investor today, the starting point must be the bond market. Just a few weeks ago, we had $17 trillion of negative yielding debt. We’re now down to about 15, but even that is way too much. This is investment money that is guaranteed to produce a loss of capital. These extreme levels in today’s bond market can only have three possible explanations. One, the world faces an economic meltdown of epic proportions. Two, the bond market is the biggest bubble we have ever witnessed, and three, we have just experienced a massive buying panic in bonds.

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    Email of the day - on trading discipline

    I have been in and out of this site since just before I was caned by GFC. I ought to feel bitter about loss of savings, however if I added up all of the suboptimal decisions in life, they might exceed a few spectacular dumb decisions 2005-2012 with a few too many zero's for comfort. I am fortunate that I have a great day job, so maybe I might get away with being a bit stupid. I have read some sad stories on this site - that speak to the difficulty of successful trading, and the high rate of failure amongst amateurs like me. I wondered what happened to the authors - did they just walk away? I value learning - have been to the chart seminar twice, and thought it very considered. The best bits for me were the insights into price behaviour, and that price/time only appears to be random; it’s just very hard to predict. 7 years ago, a subscriber asked on this site what was meant by trading discipline. I am sure you and many of your reader know; obviously I am still learning. I won't say what I think it means, but I now understand the value of a trading plan, and understanding market mechanisms. I haven't found the perfect trading guide, but I came across one recently that has helped me understand more about currency markets (and therefore all markets with leverage). It is well written, measured, not biographical but benefits from the author's market experience. So, I thought I would share it with you and your readers: it is a good read, and useful beyond a scope suggested by the title. Brent Donnelly. The Art of Currency Trading. I would be interested in what other subscribers think of its content, and any other recommendations that have had practical and positive effect on trading outcomes.

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    China Is Breeding Giant Pigs That Are as Heavy as Polar Bears

    This article from Bloomberg news may be of interest to subscribers. Here is a section:

    High pork prices in the northeastern province of Jilin is prompting farmers to raise pigs to reach an average weight of 175 kilograms to 200 kilograms, higher than the normal weight of 125 kilograms. They want to raise them “as big as possible,” said Zhao Hailin, a hog farmer in the region.

    The trend isn’t limited to small farms either. Major protein producers in China, including Wens Foodstuffs Group Co, the country’s top pig breeder, Cofco Meat Holdings Ltd. And Beijing Dabeinong Technology Group Co. say they are trying to increase the average weight of their pigs. Big farms are focusing on boosting the heft by at least 14%, said Lin Guofa, a senior analyst with consulting firm Bric Agriculture Group.

    The average weight of pigs at slaughter at some large-scale farms has climbed to as much as 140 kilograms, compared with about 110 kilograms normally, Lin said. That could boost profits by more than 30%, he said.

    The large swine are being bred during a desperate time for China. With African swine fever decimating the nation’s hog herd -- in half, by some estimates -- prices of pork have soared to record levels, leading the government to urge farmers to boost production to temper inflation. Wholesale pork prices in China have surged more than 70% this year.

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    Stocks Rally on Fed Bets as Jobs Calm Growth Fears: Markets Wrap

    This article by Randall Jensen and Sarah Ponczek for Bloomberg may be of interest to subscribers. Here is a section:

    “This one comes in pretty close to neutral in terms of the slowdown. It’s not encouraging, it doesn’t look like a re-acceleration in growth, but it also probably puts at bay some of the fears that have come in around the ISM manufacturing and ISM services numbers,” said Luke Tilley, chief economist at money manager Wilmington Trust Corp. in Delaware. “This should make people and investors comfortable that we still have enough job growth to keep consumer spending on the positive side.”

    Today’s job numbers followed a string of disappointing economic data this week that had fueled concerns a slowdown in manufacturing could spread to the consumer, and in turn ratcheted up bets that the Fed will reduce rates this month. The burst of rate-cut optimism helped snap a two-day losing streak that reached 3% in the S&P 500 Index Thursday.

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    Rare Earths Review Erbium: The Secret Sauce in 5G Networks?

    Thanks to a subscriber for this report from Hallgarten & Company which may be of interest. Here is a section from the conclusion:

    We sense that China’s Rare Earth advantage has been made vulnerable due to massive overexploitation over the last 30 years and the ONLY remedy is to cut back exports and start stockpiling material before the country becomes as dependent upon fickle outside forces in REEs as it is in Cobalt. This potentially sets the scene for a supply crunch outside China and no amount of WTO whining and appeals will stop the Chinese halting exports if it is deemed to be in the national interest.

    We have previously called the Great Dysprosium Crisis of 2020, and now we add the Great Erbium Dilemma of 2021-24. These linked supply crunches will come as a “surprise” to the powers that be, both in China and outside. And yet the warning signs are there for everyone to see. The Adamas report on Dysprosium was a red flag, and now the more sotto voce alarm bells of Erbium are largely going unheeded as well. For those countries wanting to be players, or at least control their destiny, in 5G the hunt for Erbium must now be powered up.

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    The Global Internet Phenomena Report

    Thanks to a subscriber for this report from Sandvine which may be of interest. Here is a section:

    Google (Alphabet): YouTube, Google Cloud, Google Play, Google Search, Google Docs, Google Drive, DoubleClick, Gmail, and Crashlytics
    Netflix: Netflix Video
    Facebook: Facebook, Instagram, Facebook Video, WhatsApp, Facebook Messenger, Oculus Rift Microsoft: Xbox Live, Windows Update, Skype, Outlook 365, Office 365, SharePoint, OneDrive, Windows Store, LinkedIn
    Apple: iTunes, iCloud, Apple Software Update, FaceTime, Apple Music, Apple.com, iCloud Photo Stream, Mac App Store

    The brands with video traffic have a significant advantage on the downstream. Google (YouTube), Netflix, Facebook, and Amazon (Amazon Prime) have strong video offerings. Apple soon will, and Microsoft’s entry into gaming streaming (Mixer) will likely move them up this list if they can continue to recruit high profile gamers.

    As shown in the chart, Google is #1 overall and on the upstream. The combination of YouTube, Google Search, and Google Cloud are the biggest contributors to the upstream traffic, as they are an integral part of any Android device’s experience.

    Netflix is the #1 on the downstream and #2 overall as the only pure play in the bunch. As we mentioned last year, if Netflix was not the most efficient streamer at every resolution, their total could easily be twice what it is today, and they continue to excel in video codec work and efficiency in resolution downshifts and upshifts.

    Google is also #1 on connections. This is a much more collaborative effort among Google apps. YouTube, Google Cloud Messaging, Google Search, Crashlytics, DoubleClick, and even Nest are the biggest contributors to Google connections per device.

    Amazon: Amazon Prime, Twitch, Amazon.com, Alexa, Amazon Glacier, Amazon Music

    When combined, these brands took up over 43% of all traffic volume on the internet: The details are interesting. Overall, Google edged out Netflix as the top consumer of bandwidth on the internet (as well as upstream) and dominated in the percentage of connections. Unsurprisingly, Netflix was the single largest consumer of traffic downstream, but Google was not far behind. This is confirmation that brands can build synergies, expand their business, and succeed. The obvious outlier in this case is Netflix, which does one thing and does it exceedingly well, albeit at very high volume. With new streaming services coming out from Facebook and Apple, with 4K and live streaming taking hold, these numbers might climb even higher next year.

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