Colin Twiggs, Author at the patient investor

July 24, 2012

Christian Noyer: Monetizing public debt

Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the BIS: Some central banks have developed large-scale public debt acquisition programmes. They have done so for reasons relating to immediate macroeconomic stabilisation… to go beyond the zero-interest rate limit. The Eurosystem as well intervened on a much smaller scale when malfunctioning debt markets prevented the effective transmission of monetary policy impulses. There is not a single central bank that is seriously considering the monetisation of deficits with the more or less declared intention of reducing the weight of debt via inflation. In my view, this notion is nothing more than a financial analyst’s fantasy.

via Christian Noyer: Public and private debt – imbalances of global savings.
Comment:~ No central bank has declared an intention to monetize public debt (or deficits) — reducing public debt via inflation — but without a viable alternative how many will end up there? Gary Shilling points out that “competitive quantitative easing by central banks is now the order of the day.” The Bank of Japan last year “expanded its balance sheet by 11 percent, while the Federal Reserve’s increased 19 percent, the European Central Bank’s rose 36 percent and the Swiss National Bank’s grew 33 percent.” Japan, after 20 years of stagnation and with net public debt at 113% of GDP, illustrates the predicament facing many developed countries. If there was a plan B they would have tried it by now.

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.

July 24, 2012

Christian Noyer: Public and private debt – imbalances of global savings

Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the BIS: My first remark….. In advanced countries, the average public debt to GNP ratio is 100%. In emerging countries, the figure is 30%. This is a very wide gap, and it represents one of the global economy’s largest imbalances. And one of the least mentioned. It also represents a complete reversal of the situation compared with just over twenty years ago…..
Second remark, global demand is still fairly concentrated on the advanced countries. Not only is their debt higher, but their savings (as a ratio of GNP) are lower. The G7 countries alone still account for 56% of global consumption. The problem is clear. How can we hope to raise our level of consumption if we need to reduce our level of debt and increase our savings? And if the advanced countries’ consumption stops growing, what will happen to global economic growth and particularly that of emerging countries with entirely export-oriented economies?

via Christian Noyer: Public and private debt – imbalances of global savings.

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.

July 24, 2012

Falling Treasury yields: Money is flowing out of stocks

Retracement of 10-Year Treasury yields respected the new resistance level after breaking support at 1.45 percent, signaling a decline to 1.20 percent*. There has been little change in Fed holdings over the past week that could distort bond flows. Declining yields reflect investors leaving stocks for the safety of bonds and warn of a stock market correction. Recovery above 1.70 percent is most unlikely– without QE3 — but would suggest another stock market rally.

10-Year Treasury Yields

* Target calculation: 1.45 – ( 1.70 – 1.45 ) = 1.20

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.

July 24, 2012

Free steak knives with your boom! | | MacroBusiness

Houses and Holes: Thermal coal is already at a price that is uneconomic for many mines and if iron ore were to settle in the $110 region, which is my call, then the margins for many an iron ore hopeful are looking suddenly thin too. If this keeps up for a few months then the next phase of the boom for Australia is pulled capex.

via Free steak knives with your boom! | | MacroBusiness.

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.

July 23, 2012

7-23 – The Housing “Supply” I See | Hanson Advisers

Bottom line: In order to permanently de-lever this housing market something must be done to address the 20 to 30 million homeowners in a negative or “effective” (lacking the equity to pay a Realtor 6% and put 20% down on a new house) negative equity position; with 2nd liens; and without the credit needed to qualify for a new vintage loan. That’s because repeat buyers are the “durable” demand cohort; not first-timer buyers and “investors” who come and go with the stimulus wind like we saw in 2010 and will again in the second half of this year.

via 7-23 – The Housing “Supply” I See | Hanson Advisers.

Hat tip to Barry Ritholz

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.

July 23, 2012

Hong Kong & China

The Hang Seng dropped 3 percent Monday, testing medium-term support at 19000. Failure of support would warn of a decline to 16000*. 63-Day Twiggs Momentum below zero already suggests a primary down-trend. Breach of primary support at 18000 would confirm.

Hang Seng Index

* Target calculation: 18000 – ( 20000 – 18000 ) = 16000

With the Shanghai Composite in a primary down-trend, all we need is for the Shenzhen Index to break support at 880 to complete the trifecta. A peak below zero on 63-day Twiggs Momentum already warns of a primary down-trend.

Shenzhen Composite Index

* Target calculation: 900 – ( 1000 – 900 ) = 800

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.

July 23, 2012

Australia: ASX 200 in retreat

The ASX 200 index retreated sharply Monday, following bearish performance in the US on Friday. Downward breakout from the rising channel would indicate another primary down-swing, with a target of 3800*. Reversal below 3990 would confirm.

ASX 200 Index

* Target calculation: 4000 – ( 4200 – 4000 ) = 3800

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.

July 23, 2012

Asia: China, Japan bearish

Japan’s Nikkei 225 index is headed for another test of long-term support at 8000/8200 on the monthly chart. The latest peak below zero on 13-week Twiggs Money Flow warns of strong selling pressure. Failure of support would signal another test of the 2008/2009 lows at 7000.

Nikkei 225 Index

China’s Shanghai Composite Index is testing its 2011 low at 2150 on the weekly chart. Failure would indicate a decline to 1800*. 63-Day Twiggs Momentum below zero continues to warn of a primary down-trend. Recovery above 2250 remains unlikely, but would suggest another rally to 2500.

Shanghai Composite Index

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

India’s Sensex is retracing to test support on the weekly chart. Respect of 17000 would indicate a rally to 18500, but 63-day Twiggs Momentum oscillating in a narrow range around zero suggests a ranging market and another test of primary support at 15800/16000 remains as likely.

Sensex Index

Singapore’s Straits Times Index is testing resistance at 3040. Recovery of 63-day Twiggs Momentum above zero suggests that the primary up-trend is intact, and breakout would signal an advance to 3300*, but a ranging market is more likely.

Singapore Straits Times Index

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

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.

July 23, 2012

Europe: Selling pressure

Dow Jones Europe Index is testing the long-term descending trendline at 240 but 13-week Twiggs Money Flow failure to cross above zero warns of strong selling pressure. Breakout below primary support at 210 would indicate a decline to 180*.

Dow Jones Europe Index

* Target calculation: 210 – ( 240 – 210 ) = 180

Narrowing 63-Day Twiggs Momentum (around zero) on the FTSE 100 suggests a ranging market. Respect of resistance at 5750 would test primary support at 5250, while breakout would indicate an advance to 6000.

FTSE 100 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.

July 23, 2012

Canada: TSX 60 hesitancy

Short, overlapping candles indicate hesitancy on Canada’s TSX 60 index. Reversal below the lower channel at 650 would warn of another primary down-swing — confirmed if primary support at 640 is broken. Respect of the lower channel, however, would indicate a rally to the upper channel border. 21-Day Twiggs Money Flow is rising but breach of the trendline would warn that buying pressure is easing.

TSX 60 Index

* Target calculation: 640 – ( 680 – 640 ) = 600

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.