Watch Pakistan and Kazakhstan

Did anyone notice Imran Khan (the leader of the world’s 6th largest army and 8th largest air force) visiting Putin (who is in charge of the world’s 5th largest army and 2nd largest air force)

….only hours after the commencement of the Russian/Ukraine invasion.

Incidentally, Pakistan has a population of 220 million compared to Russia’s 144 million.

News reports say they are “expected review the entire array of bilateral ties including energy cooperation besides exchanging views on major regional and international issues, along with Mr Khan expecting to push for the construction of a long-delayed, multi-billion-dollar gas pipeline to be built in collaboration with Russian companies”.

This makes for interesting analysis especially since Pakistan still receives millions of dollars in aid from the U.S. (notwithstanding Trump having cut $1.3 billion of that flow) including 33 million does of COVID-19 vaccines.

More so, Pakistan pays $10-$13 billion per annum on external debt servicing.

Other ties to watch are between Russia and Kazakhstan.

Kazakhstan happens to be Central Asia’s largest country and has a GDP similar to Ukraine ($160 billion).

In January 2022, Kazakhstan asked for Russian help to quell protests and riots (227 died in a week of unrest) over the rising cost of fuel. Russia acquiesced with a military presence.

There are Caspian pipelines involved and Kazakhstan produces 40% of the world’s uranium.

See where I’m going?

It’s time to study the maps.

February 25, 2022

by Rob Zdravevski

rob@karriasset.com.au

Some wicked intra-day moves

Yesterday’s trading action was certainly wicked but also a study of keeping your nerve. That all depends on what side of the trade you’re on.

I’ve added some notes to the charts below which show WTI Crude and Silver trading over the past 30 hours in 15 minute intervals.

Incidentally, the S&P 500 fell 2.6% at yesterday’s open to then turnaround and rise 4.2% from its low….

The extract below is from my post yesterday, recounting what the prices did when Coalition Forces commenced the 1991 Iraq bombing campaign.

“That extensive aerial bombing campaign lasted from 17 January 1991 to 23 February 1991.

Ironically, on the day the campaign began, WTI Crude Oil rose 6.4%.

Over the next 32 days, the price of Oil then fell 44%.

and the S&P 500 rose 20%”

Sounds like the 1991 Baghdad bombings

February 25, 2022

by Rob Zdravevski

rob@karriasset.com.au

Sounds like the 1991 Baghdad bombings

In January 1991, I was in Seattle, when we were taking batting practice in the cages, just when our head baseball coach came barreling around the corner in his Ford Bronco. He jumped out of the car and said; “Holy Shit”, we’re bombing Baghdad”.

He declared practice over and sent everyone home. 

Being Australian, I wasn’t too perturbed and asked another coach if he could stay back with me to throw me some extra balls to hit.

90 minutes later, I arrive back at my apartment to find my room (and team) mates on their way to drunkenness as they watched the bombardment on CNN.

They were already talking about moving to Canada as rumours of reinstating compulsory military service were spreading.

Today’s media noise about Russia, Ukraine, NATO, the U.N. and the United States sounds just like the ‘noise’ I was hearing when Iraq was invading Kuwait and then the U.S. (and coalition) started their bombing campaign.

Wikipedia says, “The Gulf War was a war waged by coalition forces from 35 nations led by the United States against Iraq in response to Iraq’s invasion and annexation of Kuwait arising from oil pricing and production disputes.”

Incidentally, it was also believed that the coalition forces also commenced the bombings in order to protect Saudi Arabia.

That extensive aerial bombing campaign lasted from 17 January 1991 to 23 February 1991.

Ironically, on the day the campaign began, WTI Crude Oil rose 6.4%.

Over the next 32 days, the price of Oil then fell 44%.

(funnily shares in companies such as Exxon and Occidental rose 10% through this time)

The U.S. 10 year bond yield fell from 8.2% to 7.7%

and the S&P 500 rose 20%

It’s not exactly the same, but it kind of ‘rhymes’. 

What is telling at this moment, is that it doesn’t seem that the U.S., NATO or any coalition is about to fly in and defend Ukraine let alone bomb Moscow or St. Petersburg. 

It’s more telling that they are using stern words of “condemnation’ and rolling waves of sanctions instead.

With that, Zelensky may tip his King (chess piece) over because there isn’t a larger army coming up behind him.

For the statistic fans, Moscow and St. Petersburg are Europe’s 2nd and 4th most populous cities.

Istanbul is 1st, London 3rd, Berlin is 5th, Madrid 6th and Kyiv and Rome shares 7th and 8th place.

February 24, 2022

by Rob Zdravevski

rob@karriasset.com.au

You’ll be surprised with a little research

As well as Ukraine being Europe’s poorest country * and its most corrupt **, it also has its highest homicide rate.

Last year’s Ukrainian homicide rate was 6 people for every 100,000.

The U.S. homicide rate was 5.

In the greater Ukraine Donbas region, which has a population of 4 million, 481 people have died in 2021. 

Of which 178 were combatants and a further 303 being civilians. ***

Keep in mind, that the region has been involved in a rebel separatist conflict for the past 7 years.

When we calculate this compared to the 4 million people who live in Donbas.

Note: this is a death rate and not an intentional murder rate, as homicide statistics are referred to.

During 2021, in the City of St. Louis, 196 people were murdered.

This gives them a homicide rate of 82 (per 100,000 inhabitants) 

while, New Orleans is at 40,

Las Vegas is 31

and Chicago is 24

Not being political, just some perspective.

* on income per capita 

** http://www.transparency.org/

*** http://www.crisisgroup.org/content/conflict-ukraines-donbas-visual-explainer

February 24, 2022

by Rob Zdravevski

rob@karriasset.com.au

Protecting against mischief in Taiwan

I’m thinking China may start getting fresh with Taiwan and so, a January 2023 $100 strike put option for $7.50 is on my mind.

Here is my February 2nd missive,

Taiwan Semiconductor is the real prize

February 23, 2022

by Rob Zdravevski

rob@karriasset.com.au

Peaking early

Today’s price of WTI Crude Oil is the same as it was 3 weeks ago (on February 4th). Doesn’t that sound astonishing in light of ‘Russia’s move into Ukraine territory’.

‘Tops’ often happen earlier than you may care to remember.

It seems that investors and/or market commentators forget when the peaks actually occurred.

In the charts below, I’m showing you the peak in Salesforce.Com and PayPal occurred in November 2021 and July 2021 respectively.

Many may think the peaks were only in the last few weeks.

February 23, 2022

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending February 18, 2022)

The following assets (on a weekly timeframe) registered an Overbought reading or traded more than 2.5 standard deviations above its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations)

German 5 & 10 year government bond yields

U.S., Japanese & Portuguese 10 year government bond yields

KBW Banking Index

Gold (in AUD)

Overbought (RSI > 70)

Australian 2, 3 and 5 year government bond yields

U.S 2 & 5 year government bond yields

Korean, Russian and New Zealand 10 year government bond yields

CRB Index

Bloomberg Commodity Index

Australian Coal

Aluminium

Tin

WTI Crude

Cattle

Soybeans

The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)

Australian 10 year government bond yields

Spanish, French, Greek & Italian 10 year government bond yields

Lean Hogs

And Singapore’s Strait Times Index (for 2 consecutive weeks)

Assets (securities) which touched the other side of the extreme, being Oversold (where the RSI is < 30) or were at least 2.5 standard deviations below its mean are;

Extremes “below” the Mean (at least 2.5 standard deviations)

CSI 300

Helsinki OMX 25

Oversold (RSI < 30)

U.S. 10 year minus 2 year government bond yield spread

Hot Rolled Coil Steel (HRC)

The Oversold Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)

None

Notes & Ideas:

The big news is the careering of short duration bond yields into the stratosphere. Government 2 and 3 year bonds are now where 10 year bonds were yielding only 5 months (October 2021) ago.

After 6, 7 or 8 consecutive rising weeks, streaks come to an end and that was the case for many energy prices.

As was the case for last week’s overstretched prices in Coffee & Cotton.

Incidentally, Gasoline, Heating Oil and forward contracts in WTI Crude made bearish outside reversal weeks.

There is merit in referring back to the previous few weeks editions of ‘Marco Extremes’ to remind you of the relevance of the watching for the swings in the pendulum.

The larger advancers over the past week comprised of; 

Gold 3.1%, Hogs 20.9%, Natural Gas 12.4%, Nickel 2.5%, Palladium 6.6%, Platinum 5.7%, Silver 2.7% and Gold in AUD rose 2.1%.

The group of decliners included ;

Rotterdam Coal (2.9%), Cocoa (6.1%), WTI Crude (3.1%), Gasoil (1.9%), Heating Oil (4.5%), JKM (3.1%), Coffee (2.4%), Lumber (3.5%), Gasoline (2.5%), Cotton (3.3%), Dutch TTF Gas (4.7%), Oats (8.4%), KBW Banking Index (3%), AEX (2.2%), DAX (2.5%), Dow Jones Industrial (1.8%), Milano MIB (1.7%), HSCEI (2.8%), Hang Seng (2.3%), IBEX (2.4%), MOEX (4.3%), Nasdaq 100 (1.7%), Nikkei 225 (2.1%), Oslo (2%), Copenhagen (2.8%), Helsinki (2.9%), Stockholm (4.2%), Swiss SMI (1.8%), FTSE 100 (1.9%) and the S&P 500 fell 1.6% (having fallen 3.4% in the past 2 weeks.

February 20, 2022

by Rob Zdravevski

rob@karriasset.com.au