Colin Twiggs, Author at the patient investor

November 13, 2012

Australia: Not fiscal cliff — fiscal flab

Jessica Irvine writes that Australia is faced with an aging population and spiraling health costs, but a free-spending government will leave us unprepared.

Two veteran Budget forecasting groups, Deloitte Access Economics and Macroeconomics, have in recent days delivered their verdict on Mr Swan’s mid-year Budget update: It’s codswallop. The Federal Budget is not in surplus by $1.1 billion this year but in deficit by $4.2 billion, according to Deloitte, and $7 billion, according to Macroeconomics…..

via We're afflicted with the same fiscal flab most governments struggle with | thetelegraph.com.au.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

November 13, 2012

President Obama Has Drawn A Dangerous Line In The Sand – Business Insider

Bruce Krating’s analysis of the fiscal cliff stoush:

The headlines make it seem like B&O are ready to work together, and achieve the necessary compromises to avoid falling off a cliff. I think the press has it wrong. We’re headed into a bitter fight; in part, because the President has drawn a very dangerous line in the sand…..

via President Obama's Has Drawn A Dangerous Line In The Sand – Business Insider.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 13, 2012

Jan Hatzius Connects All the Dots | Business Insider

Important insight from Jan Hatzius at Goldman Sachs, reported by Cullen Roche:

The US private sector continues to run a large financial surplus of 5.5% of GDP, more than 3 percentage points above the historical average. This is the flip side of the deleveraging of private sector balance sheet. We expect a normalization in this surplus over the next few years to provide a boost to real GDP growth. This is the key reason why we see US economic growth picking up gradually in the course of 2013 and into 2014, despite the near-term downside risks from the increase in fiscal restraint……..

via Jan Hatzius Connects All the Dots – Business Insider.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 13, 2012

Stopping the Runaway Train: The Case for Privatizing Amtrak | Randal O'Toole | Cato Institute

Interesting analysis by Randal O’Toole on the future of Amtrak:

When Congress created Amtrak in 1970, passenger-rail advocates hoped that it would become an efficient and attractive mode of travel. More than 40 years of Amtrak operations have disappointed them, as Amtrak has become the highest-cost mode of intercity travel and remains an insignificant player in the nation’s transportation system. Nationally, average Amtrak fares are more than twice as much, per passenger mile, as airfares. Despite these high fares, per-passenger-mile subsidies to Amtrak are nearly nine times as much as subsidies to airlines, and more than 20 times as much as subsidies to driving. When fares and subsidies are combined, Amtrak’s costs per passenger mile are nearly four times as great as airline costs…….

via Stopping the Runaway Train: The Case for Privatizing Amtrak | Randal O’Toole | Cato Institute: Policy Analysis.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 13, 2012

Asia: India strong, China & Japan weaken

India’s Sensex continues to hold above 18500, suggesting a healthy up-trend. Rising troughs above zero on 13-week Twiggs Money Flow indicate buying pressure. Breakout above 19000 would signal an advance to 21000*.

Sensex Index

* Target calculation: 18.5 + ( 18.5 – 16.0 ) = 21.0

Singapore’s Straits Times Index continues to test support at 3000. Breach of 2950 would test the lower trend channel, while breakout above 3100 would indicate an advance to 3300*. Oscillation of 63-day Twiggs Momentum around zero would reflect a ranging market.

Singapore Straits Times Index

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

Japan’s Nikkei 225 is headed for another test of medium-term support at 8450 after latest economic numbers warn of a contraction. Failure would test primary support at 8200. Oscillation of 13-week Twiggs Money Flow largely below zero indicates selling pressure. Breach of 8200 would signal a decline to 7200*.

Nikkei 225 Index

* Target calculation: 8200 – ( 9200 – 8200 ) = 7200

South Korea’s Seoul Composite Index is testing medium-term support at 1880 but rising 13-week Twiggs Money Flow reflects buying pressure. Recovery above 1960 would test this year’s high at 2060.

Seoul Composite Index

China’s Dow Jones Shanghai Index is testing primary support at 250. Breakout would offer a target of 225*. Oscillation of 63-day Twiggs Momentum below zero reflects a primary down-trend.

Dow Jones Shanghai Index

* Target calculation: 250 – ( 275 – 250 ) = 225

Rising 13-week Twiggs Money Flow above zero indicates strong buying pressure on the Hang Seng Index. Breakout above 22000 would signal an advance to 24000*. A test of the rising trendline is still a possibility, but a correction that respects support at 20000 would still reflect a healthy up-trend.

Hang Seng Index

* Target calculation: 22 + ( 22 – 20 ) = 24

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 13, 2012

China – Hong Kong divergence

Divergence between the Shanghai Composite Index and Hong Kong’s Hang Seng Index is apparent over the last 12 months, with Hong Kong rebounding while Shanghai weakens.

Shanghai Composite Index and Hong Kong's Hang Seng Index

With no major changes in the HKDCNY exchange rate, to me this reflects political and economic instability on the mainland.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 13, 2012

Australia: ASX 200 falls

The ASX 200 broke support level at 4400, warning of a correction. Respect of medium-term support at 4250 would suggest another primary advance, while a test of primary support at 4000 would indicate an aimless market.

ASX 200 Index

* Target calculation: 4450 + ( 4450 – 4000 ) = 4900

A 21-day Twiggs Money Flow peak below zero on the daily chart reflects medium-term selling pressure.
ASX 200 Index

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 12, 2012

Resolving The Crisis And Restoring Healthy Growth: Why Deleveraging Matters? | David Lipton | IMF

David Lipton, IMF First Deputy Managing Director writes that when G20 leaders met at the height of the GFC they had two simple objectives: i) to resolve the crisis; and ii) to make sure it did not happen again……..

Progress has been hard in part because the measures called for under each agenda item to some extent undermine the other agenda item. The first objective, exiting the crisis requires strong enough demand to restore growth and jobs. At the same time, the second objective, ensuring sustainability and laying the foundation for a stronger global economy, requires deleveraging in many advanced economies, which will dampen demand, particularly if it happens simultaneously in many sectors in many countries.

Lipton points out that the actions of all major players impact on each other. He calls for deficit countries to continue fiscal consolidation and private sector deleveraging “in a sustainable way” and for “structural reforms to improve competitiveness”. Surplus countries also need to cut back on “reserve accumulation” and allow “more exchange rate flexibility”.

via Resolving The Crisis And Restoring Healthy Growth: Why Deleveraging Matters? by David Lipton, IMF First Deputy Managing Director.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 12, 2012

Japan economy shrinks as China dispute takes toll

Elaine Kurtenbach at USA Today writes:

Japan’s economy contracted in the latest quarter, signaling that like Europe it may already be in recession, further weighing down world growth. On an annualized basis, the world’s No. 3 economy shrank 3.5% in the July-September quarter, the government reported Monday. It was in line with gloomy forecasts after Japan’s territorial dispute with China hammered exports that were already weakened by feeble global demand……

Rajeshni Naidu-Ghelani at CNBC writes that Japan’s recovery depends on global demand:

Izumi Devalier, Japan economist at HSBC in Hong Kong backed that sentiment saying Japan’s economic development over the past decade shows that it’s been extremely dependent on exports and external demand.

“Sad to say, Japan will have to wait for the overseas economies to pick up before it sees its own economy really lifted,” Devalier told CNBC.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 12, 2012

UK: Bank break-up an option if ring-fence fails | Vickers

Matt Scuffham and Steve Slater write:

Britain could force banks to fully separate their retail operations from riskier areas if lenders fail to implement a “ring-fence” that sufficiently safeguards taxpayers or improves behavior, the architect of the plan said on Monday.

The Independent Commission on Banking, chaired by Sir John Vickers, recommends that UK banks “ring-fence” their retail operations to protect customers from riskier investment banking activities.

Andy Haldane, the Bank of England’s financial stability director, commented last week that ring-fencing would only work if the retail operations have a separate management, pay structure and balance sheet.

via Bank break-up an option if ring-fence fails: Vickers | Reuters.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.