Central banks are just getting started with monetary easing

REVIEW AND PREVIEW:

Stocks fell on Friday after President Donald Trump ordered in a series tweets that U.S. companies find alternatives to their operations in China. “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing… your companies HOME and making your products in the USA,” Trump tweeted. “The threats always been out there but there’s been no need to provoke that,” said Art Hogan, chief market strategist at National Securities. “It’s almost like the administration was expecting the Fed to announce a rate cut at the Jackson hole meeting. And since Powell did not deliver, he went to defcon 5.” – Fed Imbert, “Trump Orders U.S. Companies to Look for Alternative to China,” https://www.cnbc.com, August 23, 2019.

Central banks are just getting started with monetary easing, hedge fund manager Kyle Bass said, predicting U.S. interest rates will keep falling and follow global interest rates all the way down to zero. “We’re the only country that has an integer in front of our bond yields. We have 90% of the world’s investment-grade debt. We actually have rule of law and we have a decent economy. All the money is going to come here,” Bass, founder and chief investment officer of Hayman Capital Management, told CNBC on Tuesday.- Fred Imbert, “Kyle Bass Says U.S. Interest Rates Will Follow the Rest of the World to Zero – “This is Insane,” https://www.cnbc.com, August 20, 2019.

We are back to chasing hurricanes again. It was a lovely break, getting married on a fabulous Rhine River Cruise ship and honeymooning in the lush, rolling hills and vineyards of Tuscany, Italy. But delving back into the world of twitter storms and “insane” economic and political policies causing chaos in financial markets is what I do when I am not getting married, so I return to … the other world reality. It seems the president and I are asking some deep questions lately. Earlier in the day, he tweeted: “Who is our biggest enemy? Fed Chairman Powell or Chinese President Xi?” (hint: the answer is neither). My question is much simpler: “Which is the real reality? The soft, relaxing lifestyle of Tuscany, or the chaos of sudden tweets and news stories on my computer screen leading to another avalanche in world equity markets?”

All seemed well until Friday. Stock markets were recovering nicely following their double bottom lows of August 7 and 15, surrounding the Jupiter and Uranus stations of August 11. But those rallies ended abruptly on Friday, shortly after the Sun entered the practical sign of Virgo, when China announced new tariffs on another $75 billion worth of American goods, including automobiles, in retaliation for tariffs the U.S. declared on Chinese goods a few weeks ago. The Chinese had announced back then that they would retaliate, and the markets took the announcement in stride, until the president’s Twitter rage was unleashed. It was classic astrology in action, for as stated at the end of last week’s column, “The major geocosmic changes of this week involve the Sun, Venus, and Mars all leaving the sign of Leo for Virgo. This has importance to the chart of President Donald Trump, for each will cross his natal Ascendant and Mars in late Leo.” Mars symbolizes the urge to fight, to act aggressively and impulsively. That’s fine in and of itself. But once it reacts in anger or rage, nothing can stop it until it exhausts itself. By then, there can be unintended consequences, such as another leg down, another crash in the stock market, which is the last thing the President wants. Once again, this is typical bear market behavior. The market goes up in steps, then gives it all back and more, very suddenly, as it goes down in elevators.

SHORT-TERM GEOCOSMICS AND LONGER-TERM THOUGHTS

Germany’s central bank has warned that Europe’s largest economy is likely to tip into recession in the third quarter, dragged down by a sharp drop in exports and a decline in industrial production. – Martin Arnold, “Bundesbank Adds to Fears of German Recession as Trade Wars and Brexit Hit,” Financial Times, August 20, 2019.

The next 3-4 weeks will see a deluge of conflicting geocosmic signatures, which could prove to be very confusing to investors. Perhaps they are pondering the question asked by President Trump as to who is the biggest enemy to the U.S. Is it the one he often refers to as his friend, President Xi, or his own appointment to head the Fed, Jerome Powell? By the way, when I was in China in June, in an act of extraordinary diplomacy, President Xi confirmed publicly that President Trump “is my friend,” but President Putin “is my best friend.” You may wonder what that has to do with financial markets. It illustrates China’s decision to develop a greater trading relationship with Russia (and other countries) in lieu of its uncertainty in trading with the U.S. China is finding new markets to purchase from and to sell to, replacing its former reliance on the U.S. as a stable trading partner. They are developing longer-term strategies, and adjusting, as trade alliances around the world are changing (to their advantage). The U.S. leadership is not adjusting, except to command U.S. companies to come back to America and produce their products here. Is that smart? Is this even realistic? I don’t know, because I am trying to figure out what is real and what is not. Tuscany seemed real. This does not. But if it works, then OK. If not, then we should all find our Tuscany.

But let us return to the short-term geocosmic picture. Venus and Mars (the lovers or quarrelers) are in conjunction to one another in the perfection-oriented (i.e. critical) sign of Virgo, and in a harmonious trine aspect Uranus, August 24 through August 28. The Sun will also form a trine to Uranus on August 29. Normally, one would think that would boost equity markets and indicate a breakthrough in negotiations. It could, especially as those same planets then form a trine to Saturn and Pluto, September 1-19. But behind those soft trines lie more potent cosmic forces: the conjunction of Sun and Mars on September 2 and the third and final passage of the Jupiter/Neptune mutable waning square on September 21. During the first two weeks of September, the Sun/Venus/Mars transits will form a hard T-square aspect to Jupiter and Neptune. This is why September could be a very confusing time, with contradictory messages announced. It may be fraught with rumors, resulting in either “irrational exuberance” or hysteria – or one followed by the other, as the facts cancel out the rumors, and/or hopes are dashed by the facts. Stock markets of the world may swing wildly during the first 2-3 weeks of September.

Longer-term, the question remains as to whether the Jupiter-in-Sagittarius transit (November 8, 2018 through December 2, 2019) has already correlated with the market top (I think it has, but it is still not confirmed), and/or the Sun/Mars conjunction selloff is over. As pointed out several times in this column, there is a strong historical correlation between the culmination of long-term cycle crests in the U.S. stock indices during the transit of Jupiter in Sagittarius, that usually ends at least two months before the transit ends. Ideally, that high happens nearby to Jupiter passing the middle degrees of Sagittarius. On August 11, 2019, Jupiter went stationary at the almost exact midpoint of Sagittarius. Thus, Jupiter is in the middle of Sagittarius (say 13-17 degrees), July through September.

To the Jupiter-in-Sagittarius passage, we can add the importance of the Sun/Mars conjunction on September 2. Within 4 weeks of that date, history has demonstrated that world stock indices are vulnerable to an 8% or greater decline from the high that happens during or slightly before that period. The highs of July fit this pattern. Thus, we could be amid that 8% or greater decline even now, and if so, it could end during this time frame too. But even if it does end by October, the Jupiter transit leaving Sagittarius for Capricorn on December 2 has a more bearish than bullish history. There may be a rally off the Sun/Mars low, but it doesn’t necessarily mean there will be a new all-time high that follows.

The Jupiter/Neptune aspects of September also pertain to Crude Oil, which has been flirting with the $50 mark for three months now. The first two passages of this aspect have also coincided with major cycle lows in Gold, which were followed by strong rallies. It may be the end of summer, but financial markets seem to be heating up.