Short Term Trading Week Starting: 10 Dec, page-34

The US & China are the worlds 2 biggest economies and Australia's 2 biggest trading partners which are all showing a slow down in growth..


GDP/ world growth slowing - US, China & Australia






Manufacturing & Production declining - US, China & Australia
- M&P peaked at various times throughout 2018 (circled red).
- China which accounts for 50% of the world's M&P, peaked in April and is down from previous years.
- Unless all business are going to increase the price of goods then I would imagine a decline in M&P would equate to a decline in profits...




Consumer retail sales were a bit all over the shop and a little hard to see a defined trend.
They're seen as a lagging indicator to an economy, as wage growth/and consumer spending usually reaches its peak right at the end of the cycle, just before heading into a downturn.

Corporate profits are still up overall but this is to be expected as the data is only released quarterly.
We can combine the numbers though to see a future margin squeeze on profits from a rise in wages and a decline in manufacturing and production.



Now why I have a "Long biased" to long term US Treasury Bonds and Gold.

As you know, US Treasury Bonds are seen as the safest of safe havens in times like these.
US Treasury Bonds are backed by the number 1 super power/government and reserve currency country of the world.
If their bonds were to fail then there's probably bigger issues to worry about than money..

Gold is the only rival to US Treasury Bonds but is non-yielding so is seen more as a hedge/store in value in times like these.


US Treasury Bonds yields go down when interest rates go down and vice versa.
(and/or when US Treasury Bonds are bought up, this is usually seen to be front running interest rate cycles)
Interest rates are lowered when inflation and growth are slowing, this is done to try and re-stimulate the economy/spending.

Now if the above statement is true and based on the other information/graphs/bear market conditions presented then it would make logical sense to be long, long term US Treasury Bonds.
Is this "confirmation bias"?
Or am I missing something that doesn't support my argument?



Inflation has peaked! - US, China & Australia

If inflation has peaked and is now declining, then it would go against the Fed's own policy to continue raising rates.
An accelerating slow down in world growth adds a lot of weight to the 'no more rate hikes' argument.
The sudden strong dovish tone from that of a very hawkish sounding Fed was also very telling to support the statement above.


US inflation peaked mid year after the full benefit of Trump's tax cuts were realised.
As you are aware, corporate profits are lagging by the previous quarter.
This also helps explain why the stock market peaked 3 months later in October...

Since the peak of the business/market cycle in the middle of 2018, we have seen inflation, profits, world growth, share prices and market indexes all decline from there..





US 10 yr Treasury Bond yields
Breaking down 400 base points in just over a month, front running the Fed's halt on interest rate hikes or just confirmation bias...?




Now for my "Confirmation Bias" on Gold and why it's a good time to be long..

As you know, Gold is also seen as a safe haven in times of crisis.
Investors never like to have their money just sitting there in cash, period.
This is especially true with the pitiful interest rate returns offered by banks.
Interest rates are so low that it's almost forced everyone to become speculators and not savers for the past 10 years.
(this also explains the low participation in Gold and the Gold price previously)

Now if the above is true and you believe interest rates are going lower, then why would you sit your money in a bank when it's likely that you will earn even less interest than you did before..?
(This doesn't take into account a devaluing of one's currency..)

https://www.abc.net.au/news/2018-12...NZx9ztxauOkeyVH7KDyX5huau9sBvhV44VovVAnmxkqF0


What asset class do you think investors will go looking for under the current market conditions?
I'll give you a hint,
It starts with G...


In the end it's not what I think or what I want it to be, the market is what it is.
It front runs everything based on supply & demand and rate of change in an economy.

To think different would be to say the market has it wrong...
If the market has it so wrong then why is it going down....?

So forgive me for my "confirmation bias" but can you show me where my argument is wrong and what could possibly change to make my outlook be different, as I'm finding it hard to see why my reasoning wouldn't be valid.