Tuesday Testimony - Soros On Brexit, Yellen On The Hill

by: Philip Davis

Summary

Janet Yellen testifies at 10am - big market mover.

Brexit vote is just two days away.

A look at global risk factors that are keeping us in CASH!!!

Click to enlarge

"Day after day, Head in a cloud
The man of a thousand voices
Talking perfectly loud

"But nobody wants to know him
They can see that he's just a fool
And he never gives an answer" - Beatles

As we wait for Janet Yellen's semi-annual testimony before Congress, the UK Government is pulling out all the stops for the Remain camp, including well-known currency manipulator, George Soros and well-known ball manipulator, David Beckham. Many people will analyze Soros' BS so let's concentrate on what a really handsome, rich guy has to say:

I was also privileged to play and live in Madrid, Milan and Paris with teammates from all around Europe and the world. Those great European cities and their passionate fans welcomed me and my family and gave us the opportunity to enjoy their unique and inspiring cultures and people.

We live in a vibrant and connected world where together as a people we are strong. For our children and their children we should be facing the problems of the world together and not alone.

See, Europeans are nice, we should play with them! Of course, I'm not sure if reminding British Soccer Fans about other European teams is the best way to promote love and brotherhood... As usual, the Remain camp pushes the "safe" and "comfortable" angle because they have already lost the factual, economic and political arguments. The Remain campaign is all about fear of the unknown - even though the unknown, in this case, is simply going back to the way things were, pre-EU.

IFrame

Brexit has been a fun distraction for the past month but it's not the only reason we cashed out many of our long positions on the 8th. Yellen had spoken that Monday (6th) and the market ran back to the highs and we took our money off the table, avoiding the subsequent drop - very clever in retrospect. As I noted in yesterday's post, we found 17 things to buy with our side-line cash last week alone, so we're certainly not sitting on our hands - just being cautious as we have many other things to worry about.

Click to enlargeFor example, just this morning Brazil's Telecom Oi filed for bankruptcy on it's unpayable $19Bn in debt. A lot of that debt is held by state-owned banks so the repercussions will keep vibrating through the system, just in time for the World to turn its full attention to Brazil for the August Olympics AND Presidential Impeachment Trial - both of which are now scheduled for early that month.

There's nothing more fun that traveling to a country that's having an economic depression, has a corrupt Government in turmoil and millions of people marching in the streets in 100 degree weather, and an epidemic of Zika-infected mosquitoes - tickets are going fast!

Meanwhile, China, who hosted the 2008 Olympics while the whole world was melting down financially, has a currency that's getting weaker and weaker while simultaneously building up a mountain of debt which they are being charged an average of 2.95% on, vs negative rates in the rest of the developed World.

This is putting China at a huge disadvantage and causing a big drag on their economy. Since the 2008 Olympics, China's debt to GDP level has gone from 154% to 249% - which would be like the US adding $19Tn in debt in 8 years. When it comes to the nominal amount of debt added, coupled with the sheer size of China's economy, there really is no precedent since 1960, according to Goldman Sachs, which calls the buildup an "outlier in the historical record."

Goldman Sachs said "one of the most frequent questions" from clients is whether this will inevitably lead to a financial crisis when the bubble bursts. While banking crises are "common," Goldman Sachs said, they're "not inevitable."

Click to enlarge

Not inevitable! Well, why didn't you say so - Let's buy stocks at record highs and ignore earnings and accounting issues - who's with me? Let's go!

What's that you say? You might want to wait? Japan has massive debt, Venezuela's economy is collapsing, India has experienced a sudden decline, and this week we will hear about the massive capital shortfall at US banks as they fail their stress-tests (as much as $376Bn short according to Bloomberg). Further, Pimco says Commercial Real Estate is going down over the next 12 months and then we have the uncertainty of our own November elections.

IF we can get through all that, the Fed says they are going to raise rates, which leaves little reason to want to buy stocks at record highs. You don't HAVE to be in the market - you can cash out and take a nice vacation and relax - the market will still be here when you get back and, if it isn't - it's a good thing you got out then, isn't it?

We'll hear what Janet has to say this morning and so far, we haven't had strong bounces on our indexes, nor have we gotten back over the 50 dma on the Nasdaq (4,436) and the Dow (17,794) is right on the line as is the S&P (2,078) so the question is, will the Nasdaq cross over or will the Dow and S&P cross under - that will let us know which way things are heading but prepare for some wild swings this week.

Click to enlarge

Disclosure: I am/we are short SPY, AMZN, QQQ, TZA, NFLX, TSLA, TLT.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Positions as indicated but subject to RAPIDLY change (currently mainly cash and an otherwise bearish mix of long and short positions - see previous posts for other trade ideas). Positions mentioned here have been previously discussed at www.Philstockworld.com - a Membership site teaching winning stock, options & futures trading, portfolio management skills and income-producing strategies to investors like you.