The winner of the second round trade wars is China

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/04/20180402-ChinaLivePig.png” description=”China is the largest country consuming pork and importing pork. Since pork comes from live pigs, let’s look at what happened to live pigs in China. With reference to the above chart, the price of live pigs in China abnormally drops 30%. To rescue the Chinese pig farmers,…

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Wave of bankruptcies

Toys R Us used to be a wonderland for many kids. Unfortunately, it went bankrupt. Since the 2008 financial crisis, we have seen failures in top retail stores: Circuit City, Linens-N-Things, A&P (the Great Atlantic & Pacific Tea Company), Sports Authority, and Radio Shack. Most people think  Toys R Us was…

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The winner of the first round of trade wars is the United States

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/03/20180310-SP500.png” description=”Many people think stock markets as a proxy for economy. Since Trump announced the tariffs on aluminum and steel imports, S&P 500 has bounced up about 5%. That means, investors hold an optimistic view on the current round of the trade wars.” source=”http://www.economicsignature.com/wp-content/uploads/2018/03/20180310-SP500.png” title=”The winner of the first…

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Fight with China by depreciating US dollar

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/03/20180308-USDCNY.png” description=”China owns about USD $1.2 trillion U.S. bonds. This amount costed China about Chinese Yuan (CNY) $7.8 trillion, assuming that the exchange rate was CNY/USD 6.5:1. Trump administration can intentionally depreciate the US dollar for a while, leading the exchange rate down to a low level, say 6.0:1. In the…

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Cryptocurrency play

A cryptocurrency is a digital currency based on encryption. Frequently called a virtual currency, it doesn’t have a physical form, but would only exist on computers. Its transaction history is recorded on many computers to avoid fraud. Every transaction of a cryptocurrency is recorded in a long string of blocks…

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Trump is a gray rhino

“Black Swans” are hard-to-predict events that cause chaos. Examples include terror attacks. “Gray Rhinos” are obvious dangers but often ignored by most of people. Every step made by President Trump draws global attention. It is likely that Trump will be the largest “gray rhino” in global financial markets this year…

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Commodity runs up

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180227-DBC.png” description=”Commodity (DBC) is sitting at the bottom for a while. Although the commodity index broke up few months ago, the surging power has not been strong enough. Once another selloff takes place in the stock markets, commodities have a great potential.” source=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180227-DBC.png” title=”Commodity run”] While the stock markets…

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Paired investment

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180226-DOWvsGLD.png” description=”Pared investment: Dow vs. Gold. When stock markets plunge, the money previously invested in stocks would like to park at a safer harbor, such as gold. Therefore, the two curves show negative correlation.” source=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180226-DOWvsGLD.png” title=”Pared investment”]   There are many types of markets, such as stocks, bonds, currencies,…

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Hiking interest rate impacts price-earnings ratio in stock markets

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180223-Dow-PE-ratio.png” description=”P/E ratios and yields on major indexes. ” source=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180223-Dow-PE-ratio.png” title=”Hiking interest rate impacts price-earnings ratio in stock markets” ]   Our previous article (Interest rate outlook) has addressed that the interest rate will be moving up. When the rate is increasing, assets will be reevaluated. How? Let’s begin with…

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Hiking interest rate hammers real estate market

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180222-IYRvsRate.png” description=”The chart compares the 30-year interest rate with the real estate market (IYR). The two curves show the opposite moving directions, and the interest rate is a crucial signature to the real estate market. Since middle 2016, the interest rate has been inching up from its long-term bottom…

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Gold or Go?

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180219-GLD-vs-SPY.png” description=”The blue circles show that, when the stock market (SPY) tanked in the 2008 financial crisis, the price of gold (GLD) surged dramatically. The surge remained till SPY was ready to break out the previous high during 2013 – 2014 (the yellow circles in the figure). Then, GLD…

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Interest rates foretell problematic economy

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180217-10vs30-year-rate.png” description=”Before October 2017, the rates of the two bonds have a difference of about 0.50%. A quick analysis shows that since October 25, 2017 the difference has started to narrow. The rate difference gradually shrinks to about 0.25%. The narrowed rate difference will induce problems. For instance, banks…

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Interest rate outlook

[wp_lightbox_prettyPhoto_image link=”http://www.economicsignature.com/wp-content/uploads/2018/02/20180216-interest-rate.png” description=”During the 1970s oil crisis, the interest rate was gradually pumped up, reaching a high extreme in 1981. Afterwards, the interest rate started to slide over the following 35 years. Within the past 30 years, the rate basically followed a well established down track. When the rate climbed…

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