Juggling Dynamite

Today as North American government bonds spike higher, volatility is roaring and stock and commodity prices are writhing through another day of violent convulsions. Oil has been down, up and all around, taking the world’s commodity currencies strongly higher on the morning.  After 5 years of falling, “have we bottomed yet?” is the obvious question for commodities and commodity-currencies like the Aussie and Canadian dollar.

As we look at this chart of the Canada dollar index (FXC) since 2006 , we note that the last cycle decline took just 11 months from the October ’07 high to September ’08, and then a sideways grind for a further 6 months to the March ’09 bottom, which also coincided with the bottom in bullish sentiment, equities (that were -50%+), oil and other commodities.

The major catalysts for the sharp ‘v’ bottom in March ’09 can be compared with today as follows:

1.  In spring 2009, FASB suspended mark to market accounting rules and allowed banks to not price bonds at market value on their balance sheets (still suspended today, but this isn’t a new ‘trick’).

2.  Central banks slashed interest rates and poured trillions of stimulus dollars into financial intermediaries (today policy rates are already near nil and less and central banks have already used up all their stimulus dollars over the past 5 years).

3.  Having fallen 55%, large cap stocks reached fair market valuations in March 2009 –not cheap or undervalued, but the best valuations seen in 12 years (today the S&P 500 is off just 10% from its high and still sporting the most expensive valuations in history).

4.  Investor sentiment that believed the world was ending in the spring of 2009 drove liquidity-desperate participants stampeding into the US dollar and US Treasuries looking for a safe haven (today equity market sentiment remains optimistic and complacent).

The question then is can the top already be in for the US dollar and US treasuries this cycle (and hence the bottom in commodities and commodity currencies ), if investor panic and liquidation is yet to be seen in broad equity markets?  There can be no certainty, but investors have to make their own assessments of probabilities and position capital accordingly.  Only time will tell the outcome.

This clip offers a good summary of the myriad of pressures hitting global bank revenues and balance sheets today. QE programs between 2009-14, helped to paper over problems long enough for banks to enable more bad debt and reckless risk in the financial system; for some executives to cash out (for people like Goldman’s Blankfein and JP Morgan’s Dimon to become billionaires), but it was always a short-term stall rather than a fix…

Raoul Pal, Global Macro Investor Publisher, explains his concern over European banks and lists his troubled bank list.
Here is a direct video link.

We humans can be so smart and resourceful when we chose to learn and evolve.

New Yorker Doug Manowitz built an electric vehicle from parts that he mostly ordered online. His goal was to build a zero-emission vehicle he could use to to zip around the city. Here is a direct video link.

And for all those festering over ‘range anxiety’, understand that the roads themselves are obvious solar receptors that can fuel electric vehicles and the grid itself. See: France is using 600 miles of roads to generate renewable energy.

The panels use polycrystalline silicon to trap sunlight, and according to Colas, they can be used on any road. They can reportedly support a variety of vehicular traffic and don’t need any special engineering — they can be installed right top of the road.

While the project is certainly forward-thinking, it’s not the first of its kind. In November 2014, the Netherlands opened the world’s first solar bikeway; as Mic’s Tom McKay reported in May, the project was a major success.