Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Bear in a China Shop II (by Fayssoux)

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The China bust story is gaining increasing exposure, for good reason.  The timing and character of the decline is incredibly hard to predict.  I came upon an academic study by XU Xiaonian, a professor at a business school in Shanghai.  It makes many salient points, and echoes Chanos comment that China is "Dubai times 1000," although in an understated way.  The monumental stimulus of the last year has been heavily state-funded and directed at infrastructure and real estate (not manufacturing).  The resultant loans are quite shaky. The story of when and if this investment goes bad could take years to unfold. Here is one chart from his study:

Post or Late Crisis Jan 10 

Nearer term, the Baltic Dry Index, which is one measure of the demand for commodity imports, continues to look soggy.  The "sugar high" seems to be wearing off.

 BDI 

  
 Lastly, the China-dependent commodity stocks are seeing holders vote with their feet.  PCU is one example of many:

 PCU

Mid-Day Minute (by Mike Paulenoff)

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If my work in spot gold is accurate, then the SPDR Gold Shares (NYSE: GLD) has unfinished business on the downside that will break the Dec-Jan lows at 105.31 and 106.01, on the way to 103.00-100.00 to complete the larger correction off of the 12/03 high at 119.54. For such a new downleg to emerge, my suspicion is that gold weakness will be a function of a sharp surge in the dollar. The question is what will trigger a flight to dollars. Global stock market weakness? European economic and/or “union” disintegration? Or continued fears of a contraction in China?

Dollar-Gold Analysis (by Mike Paulenoff)

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The dollar (viewed from its cash index, the DXY) continues to climb, and in fact has exceeded its prior high of 78.45 from January 12, which is a very positive near-term technical "event" for the greenback. After all, the idea that the DXY could rally, pull back, and then rally again to a higher-high in the aftermath of a powerful downtrend was unthinkable to most fundamentalists.

Now, however, with the Scott Brown victory in Massachusetts, a possible refocus on fiscal priorities by the Democrats, and trouble brewing in Greece, all of sudden, perhaps, there are underlying reasons to move into dollars? Be that as it may, my work argues that the DXY is heading for 80.00, and then 82.00. Meanwhile, gold is acting inversely, as it should. Let's notice that the price structure has sliced just beneath its Aug-Jan support line (today at $1107.25).

Inability of prices to climb and sustain above the trendline as the session wears on, coupled with continued demand for the DXY could press gold prices quickly towards a test of the December low at $1074.00.