Friday, 2 October 2015

Samurai Summary: Top Tweets 02/10/2015

If the biggest new story had to be chosen I think extreme Dollar strength would be amongst the top contenders to hold that position. We've seen a flurry of expectations on the Fed to lift rates for the first time in nearly 10 years, but nothing quite compares to the almost mammoth power of the recent surge in strength by the dollar.

In saying this, under normal circumstances it would be accepted that everything in dollars would be cheaper while everything else in other currencies are expensive which is much the case, it's mechanism helps stimulate weaker economies while the US economy flourishes. But this is not the case at all.

Take a country like South Africa for a good example, with the dollar being so strong, imports are more expensive however because the nation relies on commodities to fund the trade balance it has an offsetting effect. However with the ensuing commodities slump, it's main revenue generators from the rest of the world, namely gold and platinum have seen their respective prices plunge as excess supply continues to feed a market unable to digest such large quantities.

What further exacerbates the problem is the fact that the US economy itself is not as strong as you'd have thought it would be after a 6 year massive monetary easing program. This is why nations are finding it more difficult to trade their way out of economic recessions, where to from here is still to be seen but the outlook remains gloomy.
A rather quiet player in the larger scheme of things, Portugal is set to go to the polls on Sunday in what could mark a uneasy trend of anti-austerity backing by citizens within the Eurozone. We saw last week how a prominent province of Spain, Catalan opted to vote in favour for a separatist group whose agenda is to break away from Spain and the Euro.

Although the obstacles in front of them is steep, there can be no underestimation what such sentiment may cause not only within the country but the entire Eurozone which is why elections in Portugal will be followed closely on Sunday.

There is a worrying uptrend in these views amongst European who have become accustomed to social services supplied by government but with a depleting tax base that has resulted in many nations finding it increasingly difficult to service debt without austerity. The public want none of it saying they have been promised by those in power.

If Europe is unable to get it's act together soon the likelihood of a dissolution is becoming more probably as time goes by.
 With the Fed being sidetracked by woeful data concerns another set of jobs data is nervously holding traders back from participating too much today as they try gauge what the Fed may interpret from the data and whether its hawkish or dovish for rates.

Some of the Fed's focus has been employment and wage growth, but I must admit has been self defeating when thinking about the the quantitative measures placed in markets for the last 6 years. Rates being at all time lows of between 0-0.25% has prompted investors to seek out riskier yet higher growth securities and has resulted in stocks hitting fresh all time highs.

The transfer of wealth has been cordoned off to the wealthy while the rest of the world sits in a pickle burdened by debt of their own and a subdued economy.  What is certain is that the chickens will come home to roost with the time ticking ever so closer.
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