More tariffs. Market Jitters become trembles and a correction in China. Back on the short Eurodollar horse and new covered calls in Dutch/US Insurance.
Portfolio News
Market Jitters - Tariff Tantrum Talk was of another $100 billion in China trade targeted for tariffs. WRONG
The man knows no bounds in the game of negotiation. Is it a game of bluff or is it bullying? Add the $200 billion to the $50 billion to the solar and washing machines and steel, we are pretty close to the whole deficit of trade between US and China. A size related rescaling of the US-China deficit amounts to $344 billion. It feels like a game of bluff because US only exports $115 billion to China. China can only retaliate with tariffs on that amount of trade. Of course, they can retaliate a lot harder by withdrawing market access to US businesses and/or reducing support for North Korea sanctions and/or stop buying US treasuries and/or depreciate the Yuan.
There are more subtle ways too as the China bureaucracy can grind work into forever ever land for anything to do with US business operating in China or seeking access.
https://www.wsj.com/articles/how-china-can-retaliate-beyond-tariffs-1529428031
Markets took it on the chin right across the globe
Most spectacular was in China markets with the indices down 3 to 6% on the day and 1 in 4 stocks hitting the circuit breakers which kick in when a stock drops more than 10%. Agriculture took a beating too especially Soy Beans - China is the largest market for US sourced soy beans.
It was not all doom and gloom. The market will start working out who the potential winners are in a trade war situation. The idea of the tariffs is to level the playing field to protect and then stimulate local production. The market started its work and pushed the Russell 2000 index to a new all time high. One answer is small cap American business.
Data will be the way to win on this trade arena. Here is a chart of the deficits and surpluses by sector
The first step is to work on the deficits map and identify which local business can step in to replace trade on the top of the chart. Second step is to calibrate the chances for providers in the bottom half of the chart to find alternate markets. If they can find new markets, well and good. If they cannot, they become candidates for shorting - agriculture might be the best call for shorts. One has to asses the chances that China can find alternate sources of supply too. Then one has to gauge the chances of a compromise or backing down. Donald Trump is very dependent on farmer votes and mid-term elections are not far off. I am guessing we will see some backing down when it comes to agriculture.
Oil price went wobbly again ahead of the OPEC meeting
Iran Oil Minister was vocal about opposing any production increase making it difficult for OPEC to make any decision. The markets reacted by pushing oil prices down. Does this mean that they are beginning to smell a chance that OPEC members will start working outside the current agreement - i.e., start pumping more oil anyway? Meeting has not started yet and the speculation is rife - leaking like an oil well.
World Cup The Google search for Russia is all about the World Cup.
No surprise there as Russia won again and effectively wiped out the chances for Africa Cup holders, Egypt. Most worrying though is the risk of running out of beer. My Russian investments do depend on a steady flow of beer for the tourists - very few drink vodka is my guess.
What a novel concept. Soccer fans in the sweltering Russian summer heat want to drink beer, not vodka. Just an amazing realization to come to.
https://sportsnaut.com/2018/06/draft-problem-russia-running-out-of-beer-at-the-world-cup/
A little further down the headline list is this one.
Wilbur Ross denies insider trading on shorting a Russian stock. How many Americans are invested directly in Russia is a good question, let alone have enough information to know what stocks to short?
Meanwhile on the sporting fields, Australian headlines have gone past the Optus streaming issue to what really matters
Who are the frauds and what is the Polish goalkeeper up to in the shock defeat by Senegal? The frauds are not identified - maybe it is the players who dive.
This image was posted on reddit - it is a limited run novelty product - both stores selling it have disappeared. Hard to know who owns the image.
https://www.reddit.com/r/funny/comments/7qfrtz/realistic_foosball/
As for the goalkeeper, the problem seems more to do with the 4th official letting a player on the field during the run of play. Normally they wait for a break in play. As for results, Japan and Russia and Senegal win.
Shorts
Eurodollar 3 Month Interest rate Futures (GEZ). I watched the price chart drift upwards and then stablizie. Margin in my IG Markets account was holding steady with a steady BTC and ETH price. So I added one new short contract at 97.0095 to replace one of the contracts I closed off the day before.
I do not know that this has the best scope for asymmetric returns (compared to Euribor or Japan Government Bonds) but I do know there is less risk of central bank muddling or fumbling on the trade. The chart shows a tidy trade entry on the reversal on a 4 hour chart
The good news is the Euribor chart is showing signs of slowing the upwards trajectory - also a 4 hour chart.
Income Trades
A down day for markets meant than no US trades hit their bids. I did get hit on one European trade - a new trade on Aegon NV - the Dutch/American Insurer.
Aegon NV (AGN.AS): Sold July 2018 strike 5.6 calls for 1.88% premium (2.35% to purchase price). Closing price €5.32 (new trade). Price needs to move another 5.3% to reach the sold strike (new trade). Should price pass the sold strike I book a 32% capital gain.
Cryptocurency
Bitcoin (BTCUSD): Price range for the day was $181 (2.6% of the high) for the quietest day we have seen in recent times and is inching towards the top of the channel. Every small move up like this is good news for margin in my IG Markets account.
Ethereum (ETHUSD) Price range for the day was $34 (6.2% of the high) and poked its nose above the top of the channel (but did not close above).
CryptoBots
Outsourced Bot No closed trades on this account (212 closed trades). Problem children was unchanged (>10% down) - (18 coins) - ETH, ZEC (-44%), DASH (-48%), BTS, LTC, ICX, ADA, PPT (-55%), DGD (-46%), GAS (-58%), SNT, STRAT (-47%), NEO (-56%), ETC, QTUM, BTG (-56%), XMR, OMG.
I did tweak one robot and it opened one new trade on LTC. Worst performer is now GAS but not a lot to split between NEO, GAS, BTG and PPT.
Profit Trailer Bot No closed trades. Dollar Cost Average (DCA) list was unchanged at 12 coins with 2 coins trading flat and 10 worse. VEN did not continue its upward moves. This type of day is quite normal when ETH has a quiet day - everything else drifts down.
New Trading Bot Positions improved 1 point to -47.6% (was -48.5%).
ETH mproved 3 points and the other 3 coins traded flat.
Currency Trades
Forex Robot closed 4 trades (0.16% profit) and is trading at a negative equity level of 1.8% (higher than prior day's 1.5%).
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. Other images are credited below the images. Chart images are created using my various trading and charting platforms. They are all my own work
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers
Crypto Trading: get 6 months free trades with Bitmex for leveraged crypto trading. http://mymark.mx/Bitmex
Bitcoin: Get started with mining Bitcoin for as little as $25 http://mymark.mx/Galaxy
June 19, 2018