New Zealand Terms Of Trade Advance 1.5% In Q2

New Zealand’s terms of trade climbed 1.5 percent on quarter in the second three months of 2017, Statistics New Zealand said on Friday.

That missed forecasts for an increase of 3.0 percent following the downwardly revised 3.9 percent gain in the second quarter (originally 5.1 percent).

Export prices for goods rose 2.4 percent, while import prices for goods rose 0.9 percent.

The services terms of trade fell 4.8 percent.

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Daily analysis of major pairs for September 1, 2017

EUR/USD: After testing the resistance line at 1.2050, the price has pulled back by 190 pips, now below the resistance line at 1.1950. Another downwards movement of 150 pips to the downside would completely render the bullish bias invalid; whereas a rally from here would help restore the recent bullishness in the market. The EMA 11 is above the EMA 56, and the Williams’ % Range period 20 is now rising from the overbought region.


USD/CHF: The situation on the USD/CHF is currently dicey, the price went seriously upwards this week, but it could not lead to a clean bullish bias because it reversed as soon as it hit the resistance level at 0.9650. A movement above the resistance level at 0.9700 would help establish a bullish signal; while a movement below the support level at 0.9500 would bring about a new lease of a Bearish Confirmation Pattern in the market.


GBP/USD: The GBP/USD is still consolidating. However, a closer look at the market reveals a bull’s intent, to push the price to the upside. The distribution territories at 1.2950 and 1.3000 would be the next targets. The possibility of a bullish breakout is currently strong, owing to what price is doing right now.


USD/JPY: A bullish signal was generated on the USD/JPY this week. After the supply level at 110.50 was tested, price pulled back a bit. However, the bias on the market remains bullish, and it is expected that the market would rise further here, reaching the supply level at 110.50 again, and then targeting another supply level at 111.50.


EUR/JPY: Despite the ongoing short-term consolidation, the EUR/JPY cross is still able to maintain the bullish signal on it. The EMA 11 is above the EMA 56, and the RSI period 14 is above the level 50. There is a Bullish Confirmation Pattern in the market, and further upwards movement is expected. The next targets are the supply zones at 131.50 and 132.00.


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VAR Shocks!

By Chris at

How much money can you lose on any given day according to an entire squadron of dynamic variable factors?

It’s called value at risk (VAR), and because every hedge fund, investment bank, prop house, and algo firm wants to assess their own risk — while at the same time sneakily wanting to know how the rest of the market is assessing and quantifying their own risk — the models are all built on much the same inputs and, as such, are basically mirrors of each other.

So, you see VAR models eventually conform to the very thing they’re designed to protect us against. You see they are mostly like milk bottles — exactly the same, and they’re used widely, because they’re widely used.

Understand? Good!

Back when I had more hair… actually any hair, and I didn’t have to do 200 bloody sit-ups everyday just to keep flab from attaching itself to my stomach like some unwanted starved leech, I worked for a firm who, in order to protect their anonymity, I’ll just call PMJordan.

Anyway, while working at Lucifer, I worked on a project with the quants who built these VAR models.

These were very, very smart people. They were so smart that normal people had difficulty communicating with them.

One guy, who I’ll call “Frenchie” (to protect the anonymity of his origins), could explain parabolic curve theory to you with exquisite detail while simultaneously solving math problems in his head in mere seconds. Problems, I might add, which I would need a spreadsheet, half an hour, and intense frowning to complete.

What solidified my faith in his planet-sized brain was the fact that he was so awkward and almost completely incapable of social engagements. After the head of Lucifer in the London office addressed him, he promptly gazed up, flinched awkwardly, and stared out the window. Clearly a genius.

And “Frenchie” wasn’t the only one, because quants just like him can be found across the investment landscape developing VAR models and staring into space while their brains whirr and click away. But still, with all this brain power VAR models continue to be proven crap.

VAR models never managed to help those caught off balance when the CHF broke, and they never helped those caught off balance with Brexit.

Part of the problem, I suspect, is that in order to develop them you need a whopping great data set. Clearly the statistics based on data over, say, 10 years is better than that of 5, 100 better than 50, and so on.

One of my team here at Capitalist Exploits HQ referred me to the work of one Paul Schmelzing. Schmelzing is a visiting scholar at the Bank of England from Harvard University where he concentrates on 20th century financial history and he wrote an excellent piece on the history of bond bubbles going all the way back to the 1285. THAT’s a decent data set!

Probably the most important takeaway from Paul’s work — for me at least — is that at no period in history has there ever been the sort of bat sh*t crazy central bank intervention in the bond markets we’ve enjoyed in the last decade or so. VAR models don’t account for this.

That quite literally means that this time it is different.

I nicked this chart from Paul’s work. It provides us a clear picture over hundreds of years and thus puts things into perspective very nicely.

So here we sit in 2017 with some interesting data points, namely that back in July of last year the peak in the bond cycle was reached. Remember when I ranted about how bonds were trading as commodities?

Well, that was just one month after the peak in bonds. When we had over $13 trillion in bonds trading at negative yields.

This was the lowest level the risk free rate has ever reached in sovereign bond market history in 800 years.

This is one of the most remarkable bond bull market in all of recorded history. Lucky us!

Does this sound crazy? I think so.

How we got here? Fiscal expansion – the flip side of the bond bull market. Here we have the FED (US), the BOE (UK), ECB (EU), and BOJ (Japan).

There are a few things that turn any market. In the bond market, there are 3 that come to mind:

  1. Inflation is one of those things
  2. Geopolitical events are another
  3. Volatility is the third

Let’s look at all three.

Let’s take a look at unemployment rates — historically very closely tied with inflation. The second lowest rate since the late 60’s. Mmmm…

In the UK, we have to go back to the 70’s to find lower unemployment figures:

The EU is not faring as well but the trajectory and trend are clear:

And Japan? Same trend:

Where are you going with all this, Chris?

China just printed a 5.5% PPI number.

And over in the US….This just out from Bloomberg.

U.S. second-quarter growth was revised upward to the fastest pace in two years on stronger household spending and a bigger gain in business investment, putting the economy on a stronger track, Commerce Department data showed Wednesday.

  • Gross domestic product rose at a 3% annualized rate from prior quarter (est. 2.7%); revised from initial estimate of 2.6%
  • Consumer spending, biggest part of the economy, grew 3.3% (est. 3%), most since second quarter of 2016 and revised from 2.8%
  • Nonresidential fixed investment rose 6.9%, revised from initial increase of 5.2%
  • Corporate pretax earnings rose 7% y/y; up 1.3% q/q

And… our sauerkraut-eating, beer-swilling friends are experiencing the highest rate of accelerating inflationary growth in the last 23 years:

Our pasty friends in the UK? Bam!

Ok, so now we have all of this taking place.

Inflation being not so benign… central bankers actually getting what they want… while geopolitical risks, which I don’t have time to discuss here today but have written about extensively, are far higher than the market is pricing. And almost nobody seems to be paying much attention to them!

The connection between the structural political breaks and how these affect and feed both central bank policies and market participants behaviour is, I think, one of the most critical elements that bond investors are not considering.

Remember, both inflation or geopolitical shocks can impact the bond markets negatively. And what about the third one?

Volatility. Well, take a look for yourself.

Given that the treasury market volatility index just plunged again, the answer is that there are still trillions of dollars out there that believe in reward free risk. Are those planet sized brains building VAR models going to get it wrong again?


VAR Poll

Cast your vote here and also see what others think

– Chris

“Take calculated risks. That is quite different from being rash.” — George S. Patton



Liked this article? Then you’ll probably like my other missives on

this topic as well. Go here to access them (free, of course).


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The Alarming Militarization Of American Police


President Donald Trump has signed an executive order clearing the way for local police in America to receive military gear such as grenade launchers, high-calibre weapons, and armored vehicles. Trump and the DOJ have just reversed former President Barack Obama’s restrictions that allows local police departments to receive surplus military equipment.

Per ABCNews,

Restoring the program will “ensure that you can get the lifesaving gear that you need to do your job,” Attorney General Jeff Sessions told a cheering crowd at a national convention of the Fraternal Order of Police in Nashville, Tennessee. The group, America’s largest organization of rank-and-file officers, endorsed Trump for president after he promised to revamp the program.

The big move by Trump comes at a time where American inner cities such as Baltimore and Chicago are in absolute turmoil. The President has been very vocal about the prior administration’s unfair criticism of police forces and it was an easy win to appease his core supporters.

On the other hand, civil liberties groups and various lawmakers are not enthused about the militarization of local police and argue this will only lead to a further escalation of violence.

Kanya Bennett, legislative counsel for the ACLU,

  “Tensions between law enforcement and communities remain high, yet the president and the attorney general are giving the police military-grade weaponry instead of practical, effective ways to protect and serve everyone”

Let’s not kid ourselves, America by the day is turning into a police state where power through police force is the objective. The citizens of the police state may experience restrictions on social or financial mobility, or even on their freedom to express or communicate alternative political views.

There is another startling development in the Police States of America (PSA), in the next 8-years military drones will be replacing police helicopters. The report from Defense One states “enormous military-style drones” could be policing the skies from 2,000 ft..

Back in 2014-2015, Baltimore was a testing ground for the deep state’s military spy blimps….

Back to the Police States of America (PSA), earlier this year, I was able to see first hand the militarization in Baltimore County’s police force…


Like it or not, the Police States of America (PSA) is here. This time around the war comes home and the government is preparing through the militarization of local police forces. America is in a transitional period healing itself from decades of democratically controlled leadership in the inner cities, along with massive amounts of deindustrialization that has left our country rotting from the inside.

*  *  *

Ron Paul asks "Is a Militarized Police The Answer To Inner City Turmoil?"

Is President Trump's decision being "tough on crime," as he likes to claim, or is it all about controlling the population and undermining civil liberties?

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MEXICO: Country And US Discuss Bilateral Ties And NAFTA

Mexican Foreign Minister Luis Videgaray held a meeting with Rex Tillerson, Secretary of State of the United States, to discuss issues on the bilateral agenda, including the Free Trade Agreement of North America (NAFTA) renegotiation and the Hurricane Harvey’s effects in Texas.

Both foreign ministers endorsed their commitment to advance the pending tasks regarding economic development and security. At the regional level, they discussed the situation in Venezuela and the ‘deterioration of democratic conditions’ in the South American country, according to a statement released by the Mexican Foreign Ministry.

Regarding NAFTA, Videgaray said that Mexico’s position “will continue to be constructive, putting the national interest ahead and seeking a positive outcome for the three countries involved.”

Following his meeting with Tillerson, the Mexican foreign minister answered questions from the press. Asked about the possibility of Mexico leaving NAFTA negotiating tables, Videgaray replied that this is not the case yet, but that if the result is not beneficial to the country “of course that Mexico will not continue.”

NAFTA re-negotiations with the United States and Canada are underway amid a confusing environment. Earlier this week, the U.S. President Donald Trump said there was little chance of success in the process, blaming Mexico for the failure in the search for a new deal.

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Morocco slams prominent francophone magazine for “defamatory cover page”

The Moroccan government denounced today the French-language magazine Jeune Afrique for publishing anti-Morocco cover page of its latest edition.

Speaking at a press conference, the government’s spokesperson, Mustapha Al-Khalfi  said that the country had been exposed to “unjust campaign” by the francophone magazine, adding that it was trying to promote a “negative image” of the North African country.

Read More: The weakening of Morocco’s state institutions worsens the political logjam

Khalfi described the magazine as “trying to flee responsibility instead of finding the at the real causes of terrorism emergence.”

He described the act as “unacceptable,” stressing that Morocco has been providing assistance to several neighbouring countries in the fight against terrorism.

“Morocco has not witnessed any terrorist attacks in recent years, compared to 300 bombings and terrorist attacks in North Africa and the African Sahara region,” he pointed out.

Earlier this week, Jeune Afrique released a controversial cover headlined “Terrorism Born in Morocco.” The cover featured a five-pointed star representing the kingdom’s flag and included images of the Moroccan-born suspects involved in planning and carrying out the 17 August Barcelona terrorist attacks.

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New Zealand Terms Of Trade Jump 1.5% In Q2

New Zealand’s terms of trade advanced 1.5 percent on quarter in the second three months of 2017, Statistics New Zealand said on Friday.

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Looming Gas Shortage: “Imports Can’t Make Up For This”

The East Coast will start feeling the effects of Hurricane Harvey as the gasoline supplied from the Gulf Coast starts to dry up. One of the most important pipelines that ships refined products to the Eastern Seaboard shut down on Thursday, which means that the U.S. Southeast, Mid-Atlantic, and Northeast could see supply disruptions and price increases. The Colonial Pipeline carries gasoline, diesel and jet fuel from several refineries in Houston, Port Arthur and Lake Charles, along the Texas and Louisiana Coast, up through the U.S. Southeast to…

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Thursday Humor? How The Media Controls Your Mind

Authored by Carey Wedler via,

Even as trust in the mainstream media wanes, Americans continue to fall victim to established narratives, waxing hysterical over everything from nuclear war and natural disasters to race wars and disease. But there is at least one voice of reason.

Enter JP Sears, the viral internet sensation who blends sarcasm with spirituality and humor with heavy topics. In his latest video — which is, unsurprisingly, going viral — he breaks down “How to be Mind Controlled.”

He opens the video:

Would you like the escape the horrible reality of thinking your own thoughts? Me too. Learning to have your mind controlled is your key to escaping the hell of thinking for yourself.”

He delves right into calling out the media for terrifying the population into obedience and submission.

Good evening,” he says. “Life is a dangerous tragedy. When you accidentally start feeling peaceful or start thinking about what’s really important to you, that’s your cue to turn on the news. We’ll make you scared instead. Then you’ll instinctively want someone to protect you, which will make you completely submissive and controllable to those who you think will protect you.”

Impersonating the average fear-mongered news consumer, JP Sears continues:

I live in a constant state of fear because scary things would happen if I wasn’t scared all the time.


Thinking for yourself is like going to the grocery store and bagging your own groceries,” he muses.It’s just a lower-class way of thinking. It’s significantly more luxurious to have someone else bag your groceries for you.”

He also waxes existential, tackling the fundamental problem of consciousness in our modern society:

You’ll sleep better at night when you’re convinced to believe the thoughts in your head are your own. Because they’re in your mind, it’ll be easy for you to believe they came from your mind.”


You’re free to do anything we want you to do,” he says. “You need to be under the spell of fear to make you hypnotically suggestible.”


Poverty, disease, terrorism, war, nuclear war, cyber warfare, germ warfare, biochemical warfare, and death are all wonderful things to be afraid of. Then it’s much easier for you to be controlled because you’ll be convinced to do whatever they want you to do because you’ll think doing so will help you avoid one of the things you’re afraid of.

Sounds about right. This sentiment also aligns with what JP Sears, who started his career as an emotional healing coach, told Anti-Media in an interview earlier this summer. “We as a society, and I mean this in the most loving way … I think we as a society have positioned ourselves as helpless victims bleeding out of power,” he said, referring in particular to the chaos that has enveloped the age of Trump.

He also believes much of the strife we see in society is a result of people’s inner struggles, which are often projected back out into the real world and political world.

We’ll help you obsessively monitor large-scale politics because it’ll help you ignore your own life,” he says sarcastically in his recent video.


“If you feel worse after watching [the news], then you’re doing better.

As he said of political language during our interview:

I think it is an incredibly low vibrational, low consciousness trap of a languageI think political language is not engineered to understand, accept or connect. I think it’s a language based out of the building blocks of separation.

This is, again, reflected in “How to be Mind Controlled.”

The scary thing is that if you went a day without watching the news, you’d start to notice that there are a lot more things to appreciate than there are to be afraid of,” he says. “That’s why it’s important to watch the news every day. Preferably three times a day.”


Imagine the disaster that would happen if you got in touch with your passions. It might lead you to want to do things that are outside of your thrilling coffin of conformity. Then you’d probably end up getting shot at point-blank range by a nuclear missile and eaten by wolves. It’s a scary world out there.”

As JP Sears told us:

To me, humor can be an awakening language where we listen and consider something that we otherwise wouldn’t even listen to in the first place,” he said. So, how that works, in my delusional opinion, is that humor is a language of connection, full stop.”

He has made similar videos on topics ranging from the American Heart Association’s condemnation of coconut oil to the 2016 election, as well as the yoga and spiritual communities, vegans, and Millennials.

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