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January 2024 DDD

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@ducati916, thank you for your thoughtful response. I appreciate the time you took to address my points. Let me clarify some of my views.

1. Efficient Market Theory
I acknowledge that the "Efficient Market Theory" has its critics and isn't universally accepted but I don't accept that it has been thoroughly disproven. My point was not to fully endorse it, but rather to suggest that a significant amount of known information about a company is already priced into the market.

2. Market Efficiency
I apologise if my statements seemed contradictory. What I meant to convey is that while markets are mostly efficient, there are instances where they may not be, such as in the case of incomplete and outdated information or market manipulation.

3. Financial Statements
I agree with you that financial statements may not always reflect a company's true financial health. However, I believe that these discrepancies are often difficult to identify, even for skilled analysts.

4. System Trading
My belief in system trading stems from the idea that it can leverage data and patterns that may not be immediately apparent or accessible through traditional fundamental analysis. I understand that not all systems have high win rates, but I believe that with proper risk management, they can still be profitable.

5. Fundamental vs. Technical Investing (the can of worms)
I see value in both approaches and believe that they can complement each other. Fundamental analysis provides a deep understanding of a company's value, while technical analysis can help identify optimal entry and exit points.

6. Value Investing
I agree with your definition of value investing. It's about finding undervalued companies and waiting for the market to recognise their true value. However, I believe that this approach requires a high level of skill and patience, and may not be suitable for all investors. I posted about this very topic yesterday in the "Dump it here" thread.

I hope this clarifies my views.

Skate.
 
Very early days yet...



Repo market fails are rising.

A flight to quality (safety) is a well worn financial markets path.

During a flight to safety, the spread between credit products and risk free assets widens. In the Repo market the spread between General Collateral and Fed Funds is the gauge. It falls.

UST are the risk free asset. They are hoarded. Fails move higher.

This is where we are:



Watching with interest.

jog on
duc
 
First day back to work.

Oil News:

Hedge funds and other money managers are increasingly bearish on the oil markets’ outlook, adding a combined 61,000 short positions in Brent and WTI crude in the week to January 2.

- This marks the largest week-on-week increase in short positions since March and the second largest since mid-2017, brushing aside ongoing Red Sea shipping woes or Libyan supply disruptions.

- Whilst the markets were abuzz on Saudi Arabia’s pricing cuts, the rebalancing of commodity indexes from Goldman Sachs or Bloomberg in 2024 might have had an ever bigger impact.

- The BCOM target index for WTI decreased from 7.77% to 7.36%, prompting Citigroup to assess the impact of funds exiting WTI length at around $2 billion, the equivalent of 27,000 long positions.

Market Movers

- UK-based energy major Shell (LON:SHEL) signed a 20-year LNG supply deal with Ksi Lisims LNG, a consortium of Canadian gas producers, for 2 million metric tonnes a year starting from 2030.

- US refining major Phillips 66 (NYSESX) is actively discussing the sale of some of its non-core assets for $3 billion, under pressure from activist investors Elliott Investment Management.

- South Korea’s leading EV battery maker LG Energy Solution (KRX:373220) posted Q4 results that were almost half of the expected $460 million, including a $191 million tax credit from the US government.

Tuesday, January 09, 2024

The combined effect of hedge funds’ massive selling and Saudi Arabia cutting its February formula prices for all continents created a perfect storm for oil prices, sending WTI below $70 per barrel in intraday trading again. Both Brent and WTI have recovered since as Libya called force majeure on Sharara operations and the US dollar halted its upward surge, however weakening sentiment might prompt another downward slide this week.

Saudi Arabia Price Cut Stokes Demand Fears. Saudi Aramco slashed its February-loading prices for Asian customers by $2 per barrel, bringing the price of Arab Light to the lowest level since November 2021 at $1.50 per barrel over Oman/Dubai, prompting concerns that Asian demand feels weak.

Nigeria’s Megarefinery to Start Test Runs This Week. According to Nigerian sources, Nigeria’s 650,000 b/d Dangote refinery could begin test runs as early as this week after receiving six crude cargoes from the country’s offshore fields, aiming to reach full capacity refining by year-end.

US Supreme Court Dismisses Case of Oil Majors. The US Supreme Court declined to hear the case of ExxonMobil (NYSE:XOM), Koch Industries and the American Petroleum Institute, deciding that lawsuits over the oil industry’s “deceptive” actions vis-à-vis climate science should be heard in state courts.

Copper Contango The Steepest Since 1992. As the metal markets expect copper demand to perk up later this year but LME inventories remain ample at 161,725 metric tonnes, contango in the LME copper contract, the discount of cash futures to the 3-month contract, has widened to a 31-year maximum of $107/mt.

Chesapeake Set to Seal Next Major M&A Deal. Following last month’s Occidental-CrownRock deal, the merger of US natural gas producers Chesapeake Energy (NASDAQ:CHK) and Southwestern Energy (NYSE:SWN) is reportedly entering its final phase to create a $17 billion shale gas champion.

Iran Wants Higher Prices from Chinese Refiners. Iran’s oil exporters are withholding shipments to China as they demand narrower discounts, with recent offers heard around $5 per barrel below Brent on a delivered basis, squeezing the supply options of Chinese “teapot” refiners.

Libya Calls Force Majeure on Shut Field. Libya’s National Oil Corporation declared a force majeure at its 300,000 b/d Sharara oilfield as ongoing protests made it impossible to carry on with normal operations, also suspending crude deliveries to Libya’s largest eastern port of Zawia.

Leaking Gulf of Mexico Pipeline Remains Shut. The million-gallon oil spill from the Main Pass Oil Gathering pipeline in November remains a mystery as investigators still failed to discover the subsea source of leakage, keeping some 61,000 b/d of oil production in the Gulf of Mexico shut.

Venezuela Unable to Lift Production Soon. Venezuela’s Oil Ministry reported that oil production in the country rose slightly to 802,000 b/d in December, underperforming the 1 million b/d year-end target set by President Maduro as output remains lower than in the summer months, despite the lifting of sanctions.

ADNOC Eyes Turkmenistan’s Gas Bounty. ADNOC, the national oil company of the UAE, has signed a memorandum of understanding with Turkmenistan to cooperate in the development of the supergiant 265 TCf Galkynysh gas field, boosting the odds of the field 3rd phase coming together.

Cold Snap Sends Gulf Freight Skyrocketing. The arrival of a polar front bringing strong waves and high waves to Texas has debilitated ship-to-ship operations in the US Gulf Coast, halting most of lightering until at least Wednesday, sending regional Aframax and Suezmax rates to 2-month highs.

Namibia’s Production Outlook Turns Brighter. Boasting the multi-billion-barrel discoveries of Venus and Graff in 2021-2022, Namibia’s portfolio shines even brighter as Portugal’s Galp Energia (ELI:GALP) reported indications of hydrocarbons at its Mopane-1 exploration well to the northeast of Venus.

Japanese Firms Ramp Up Investment in US LNG. One of Japan’s largest utility companies Kyushu Electric Power (TYO:9508) is reportedly considering investing in Energy Transfer’s (NYSE:ET) Lake Charles LNG project and sign a 20-year LNG supply deal, locking in 1.5-1.6 million tonnes per year.





Really?

If this comes to fruition, gold will find increased demand as more nations de-dollarise. As they de-dollarise so oil markets must follow and de-dollarise. Which as day follows night, must mean that an alternative reserve asset must replace USD/UST, which will be gold.



Mr flippe-floppe-flye. No-one flippe-floppes faster.



Oil is looking technically a little weak here.



Problem is: you push POO too low and the US Shale oil becomes non-economic to pump.



jog on
duc
 

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Welcome back to the world of the taxpayer Mr @ducati916
Russian asset stealing:
Not only will gold win..I do not mind that ,but a new generation of Russians will hate with good reason the US and EU with their guts, and they will not hate Putin, that is for sure.
Be ready in the west for nuclear or bio chemical action directly or via the newly installed 5th column..which is not communist..
Mr Xi once again the winner, the EU the worst loser I can imagine.
Let's hope common sense if not justice will prevail
Lower poo even temporary will help with inflation all over the world and may reduce /slow the crazyness of the green shift in the west.
 

@ducati916 quote is pure speculation about the potential impact of nations de-dollarizing their economies and how it could lead to increased demand for gold. While some nations have been exploring alternatives to the US dollar for international transactions and reserve holdings, it's too early to say whether this trend will continue and whether gold will emerge as a dominant alternative.

The US dollar remains the most widely used currency in international transactions and reserve holdings, and it's likely to continue to be a dominant player "in the near future". While gold has traditionally been seen as a safe-haven asset and a store of value, it's not clear whether it could fulfil the role of a reserve asset in the same way that the US dollar does because of its stability, liquidity, and widespread acceptance.

Skate.
 

yes i thought the UK with Brexit gave them some chance of escaping the worst , but no the 5th column is thriving in the UK

please be warned if the majority of oil/gas/coal is settled in currencies outside the US/EU currency cabal , commodity prices will have little relevance to anyone but local manufacturers ( the miners/energy guys etc. will be getting yuan, rupees , ounces of gold )
 
the key to any transaction is the exchange of valuable items the receiver will accept as payment , that could be bitcoin , gold , a property , diamonds , even a nice yacht

once one party loses trust in a currency , the transaction will have to be completed using another payment device
 


jog on
duc
 

@ducati916 in response to my original post about the potential impact of nations de-dollarizing their economies and the increased demand for gold, I’ve had a close look at the screen captures that you have uploaded to debunk my post above. The addition of these captures provides an interesting perspective on this topic. In light of the ongoing discussion about the potential impact of nations moving away from the US dollar and the possible increased demand for gold, I want to offer my perspective on this issue.



# The first image above shows the US Dollar’s share of global reserve currencies from 2014 to 2023, revealing a general decline over this period, with some fluctuations. This suggests a trend of decreasing reliance on the US dollar. However, it doesn’t provide insights into the demand for gold or other potential alternatives to the US dollar.



# The second image, titled “US Dollar Share of Global Reserve Currencies,” shows the percentage of allocated reserves from 1965 to 2023. It shows fluctuations but not a definitive trend away from the dollar, reinforcing the notion that while there may be shifts in the use of the US dollar, it’s premature to predict whether this trend will persist and if gold will emerge as a dominant alternative,



# The third image, a line graph, presents the amount of US dollar assets held as foreign exchange reserves from 2014 to 2023. There is an overall increase in these holdings until around 2021, followed by a slight decline. This suggests some reduction in the holding of US Dollar assets, but it doesn’t necessarily contradict the speculation about the potential increased demand for gold.



# The fourth image discusses an increase in oil transactions being conducted in currencies other than the US dollar, indicating a trend of de-dollarization in this specific market. However, it doesn’t provide information on the demand for gold or other alternatives to the US dollar.



# The fifth image, a tweet by Louis-Vincent Gave, raises a question about the future use of USD in international trade, particularly by countries like China, Iran, and Russia. This suggests speculation about the trend of de-dollarization in international trade, but it doesn’t provide information on the demand for gold or other alternatives to the US dollar.



# The sixth image, another line graph, shows the trend of Central Bank Purchases of Gold and Foreign Official Purchases of USTs from 2013 to 2023. It indicates an increase in gold purchases and a decrease in UST purchases, suggesting a shift in central bank behaviour. However, it doesn’t provide comprehensive information on the impact of nations de-dollarizing their economies or whether gold will emerge as a dominant alternative.

While these images are interesting and suggest certain trends, it’s too early to say whether these trends will continue and whether gold will emerge as a dominant alternative. It's important to note that the shift towards de-dollarization and the potential increased demand for gold are not mutually exclusive.

It's possible that nations may choose to diversify their reserve holdings and use multiple currencies, including the US dollar, in addition to gold and other assets. The ongoing evolution of the global economic landscape and the rise of new reserve currencies, such as the Chinese yuan, may also play a role in shaping the future of international transactions and reserve holdings.

It's worth repeating
"The US dollar remains the most widely used currency in international transactions and reserve holdings, and it's likely to continue to be a dominant player "in the near future". While gold has traditionally been seen as a safe-haven asset and a store of value, it's not clear whether it could fulfil the role of a reserve asset in the same way that the US dollar does because of its stability, liquidity, and widespread acceptance".

Skate.
 
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so what if the US currency goes fully digital ( CBDC ) and some nut-job in administration can render your asset useless for any reason , at anytime in every US friendly domain across the world ( they already tried de-banking Nigel Farage over his political views and then slandered him to cover up the government involvement , and the UK government still has some standards )



i can't confirm gold ( bullion ) would be the automatic replacement , it has some draw-backs but if not gold , nor any digital currency what will replace it , certainly not government assurances
 


Mr Skate,



jog on
duc
 

@divs4ever, I understand your point of view. While gold has traditionally been seen as a safe-haven asset and store of value, it may not be the automatic replacement for the US dollar as a reserve currency due to its drawbacks I gave @ducati916.

Similarly, digital currencies like Bitcoin or other cryptocurrencies are still in their early stages of development and face many challenges before they can be widely adopted. In the absence of a clear alternative, the US dollar will continue to be a dominant player in international transactions and reserve holdings.

ducati916 said:
(1) If you don't hold it, you don't own it is the maxim that today is critical to understand. (2) With regard to PMs: if you don't hold it, you don't own it.
Click to expand...

To truly own precious metals (PMs), it's not enough to simply have a digital record or a paper certificate. Physical possession is key. When you hold PMs in your hands, you have complete control over your assets and can access them whenever you need to. This is especially important in the context of international payments in gold, where physical possession is essential for ensuring the security and integrity of the transaction. As Duc has repeatedly said, "If you don't hold it, you don't own it."

Skate.
 
ducati916 said:
Mr Skate
Click to expand...

@ducati916, I couldn't agree more. Time has a way of revealing the truth, even when our initial perceptions blinded us. In my previous post, I was emphasising the importance of being aware of the limitations of speculations and assumptions. These can often lead us astray and limit our critical thinking. Perception plays a significant role in our decision-making process, and setting up the wrong perception can limit our critical thinking.

Skate.
 


As shown below, TLT was actually up nearly 50% YoY versus a decline of more than 10% for HYG at the time of the COVID Crash in early 2020 when the Fed cut rates to zero while riskier assets like stocks and junk bonds were tanking. But ever since the COVID Crash lows, long-term Treasury yields have been trending higher (meaning lower bond prices).

Because the high-yield bond ETF has a lower average duration than TLT, it has been spared the massive drop in price that long-term Treasury bonds have experienced. Couple that with high yield spreads being in a relatively good place, and HYG is currently trading close to a five-year high on a total return basis. TLT investors are jealous.

Just as longer duration worked against TLT as rates were rising, it reaps the rewards during periods when rates decline. Since the 10/19/23 peak in the 10-year yield, for example, TLT has rallied 16.3% while HYG is up less than half that (7.8%).

Absinthe:

There's a New Generation Embracing Absinthe in America

Make 2024 the year of green hour cocktails
www.insidehook.com

Mr flippe-floppe-flye:






Liquidity = Credit.

This was not always the case. It is now.



The Repo market is the provision of credit to banks and shadow banks. Fails are again on the rise. Which in the hyper-hypothecated world of Repo is not a good sign.



Of course we are once again in this world. The US government is the world's largest debtor. They want, nay, they NEED inflation.



The above chart is from Dec. 2019. It could just as easily been from 2023. Hedge Funds, with their 'diamond hands' are the suckers at the table, once again sucking up fractions of pennies while risking dollars.

The options:



1. Basel 3 ceases to remain in effect for US banks.

2. Foreign Central Banks begin growing UST holdings fast enough again.

3. US Federal spending on Entitlements, Defense, or Interest Expense shrinks significantly.

4. The USD falls significantly to make FX-hedged UST yields non-negative again for foreign private investors.


Once again, the USD has been weakened because the other 3 are not even choices.

jog on
duc
 
@Skate


So this transition away from the USD has been going on for some time:



Mr Malmgren is a consumate Washington insider.

Your argument above is essentially: yes the charts demonstrate a decline in USD hegemony, but, that does not prove that gold is replacing the UST and by implication, the USD as a (the) reserve asset.

It is necessary to understand capital flows, trade deficits/surpluses and geopolitical positioning. These 3 macro-drivers are reshaping the post Bretton Woods/Nixon debacle and world financial markets.

Pre-USD hegemony, which is only since 1971 when Nixon took the USD off of gold, has gold not been the reserve asset. So that is 50yrs+/-. That in monetary terms is a blink of the eye. The previous 5000yrs +/- gold was all that mattered in the monetary world.

Why is this important?

It is important because the largest debtor in the history of the world, the US, is going to have to either: (a) default all at once (not good) or (b) default slowly over time aka inflation. They will pick (b).

To preserve your wealth in real terms, you have a limited number of options: (a) gold, (b) BTC, (c) land/property and some will argue (d) common stocks.

If you subscribe to the common stock argument, then which ones (sectors) might do well?

Personally, I don't. Which is why I hold physical gold/silver (80/20). Why gold?

Because:

The Chinese specifically do not want the Yuan to become a reserve asset. Which is why they have the Shanghai Gold Exchange. China along with the other BRICS will drive gold as the reserve asset.

The other critical asset is oil. Now I cannot store barrels of oil. Oil and gold are joined at the hip. Gold will reprice higher in part driven by oil demand and pricing. That is a whole separate issue.

jog on
duc
 

@ducati916, I understand your point that the US dollar has been the dominant reserve asset for only a relatively short "period of time", and that gold has historically been a key monetary asset.

Firstly, the US dollar's status as a reserve asset is not solely determined by its value relative to gold. The value of gold, on the other hand, is largely determined by supply and demand factors, as well as central banks' willingness to hold it as a reserve asset.

Secondly, while the Chinese government may have an interest in promoting the use of gold as a reserve asset, it's not clear that they will be successful in their efforts. The use of gold as a reserve asset is not without its challenges, including the need for secure storage and transportation, the lack of liquidity in the gold market, and the potential for price volatility.

Furthermore, it's worth noting that the rise of other reserve assets, such as the euro and the yuan, may pose a challenge to the US dollar's dominance. The use of these assets as reserves is not necessarily a zero-sum game, where one asset's gain must come at the expense of another. Rather, it's possible that the use of multiple reserve assets could lead to a more diversified and resilient global monetary system.

Skate.
 
ducati916 said:
The Chinese specifically do not want the Yuan to become a reserve asset. Which is why they have the Shanghai Gold Exchange. China along with the other BRICS will drive gold as the reserve asset.
Click to expand...

@ducati916, my ongoing response is to provide a different perspective on the issue. It's important to recognise that China's interest in gold is part of a "broader strategy" to enhance its economic influence globally. While China values gold for diversifying its foreign exchange reserves, it is simultaneously taking significant steps to bolster the yuan's role as a "global reserve currency".

While the Chinese government has not explicitly stated that it wants the yuan to become a reserve asset, its actions suggest that it is actively working towards this goal, which could help to increase its influence in global economic affairs.

Furthermore, China's involvement in the BRICS (Brazil, Russia, India, China, and South Africa) grouping also suggests that it is working to promote the use of the "yuan and other currencies" as alternatives to the US dollar. The BRICS nations have agreed to settle trade in their own currencies, rather than the US dollar, which could help to reduce the dollar's dominance in global transactions. (China's end game)

Skate.
 


1. Incorrect. You are confusing a 'reserve asset' and a 'reserve currency'. They are not the same thing. The UST is or more accurately was the world's reserve asset. No longer. The reserve asset is already gold. Any currency can be a 'reserve' currency. All you need is a central bank to hold it.

2. Of course it hasn't, because it doesn't. What actions? Show some evidence. There is none.

3. Of course. Those currencies then free float against the reserve asset: gold. Which goes back to the earlier post this week: this process is accelerating.



Chinese manufactures for Russian energy. Any deficits settled in:



Why would any sovereign, in their right mind, want to be at the mercy of a currency controlled by a third party sovereign? Duh.

It really isn't that hard.

jog on
duc
 
ducati916 said:
1. Incorrect. You are confusing a 'reserve asset' and a 'reserve currency'. They are not the same thing.
Click to expand...

a different explanation might be

land is an asset , it is tangible and clearly defined , gold is both an asset and a currency because it can be transported to a different owner relatively easily , gold can be used as a popular medium of settlement across jurisdictions

now a currency is only a medium of exchange ( both parties trust ) cash , diamonds , pearls , gold , some cryptos

now some believed US treasuries were a reserve asset thinking the US would never scorch somebody who lent them billions,trillions of dollars worth of goods , that thinking is starting to change

my father used to tell me , 'if you have to buy your friends , you probably don't have any ( friends )
 
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