2022/10/13 (088) Column

„Invest in the strength
of the US, EU & China
– even if uncertainties drives the price action“


Together, the US, the EU, and/or China, generate more than half of global GDP.
Similar to most of my colleagues, also in their columns, but rather also analyses, like most other financial market participants, I have been trying in vain for several weeks to formulate a basicly clear expectation for the future. In other words, recognizing a clear trend. But it should definitely, in any case, be realistic. And not optimistic just for the sake of optimism. That`s why I am fundamentally skeptical about so-called positive thinking. And this despite the fact that I still have numerous books about it on my bookshelf; and have read all heartily tasty. Because unfounded, i.e. unrealistic optimism that is not resting calmly on an honest basis of facts, in the truest sense of the word, always leads to disaster sooner or later, more or less. Also in a green disaster. What many feel. But don’t want to admit; because you don’t take the time to think through green future expectations in advance. To calculate truly in advance. Because you may feel that every socialist policy, including green ones, ultimately only leads to tax increases and/or inflation! What you don’t believe me again? Then study all the left-wing societies that have disappeared, such as the former Soviet Union, GDR, and or even the former Yugoslavia. And then always in the context of taxes and inflation. That’s left? Yes, it is!

Major international investors are still in the process of adjusting their investments, as many colleagues write about it again and again. Also in the last few days and weeks – without wanting to go into detail at this point. And wanting to mention certain names, let alone shares. Maintaining liquidity is playing an increasing role here. On the other hand, increased diversification is also being introduced. Most market guys who have another main job every trading day can only partially understand this. Which is why I keep drawing attention to my 3 variables. So that you too, yes you, yes you, can organize professional depot management for yourself. Even though you have another main job every day. And the use of derivatives, especially CFDs (thanks to the leverage effect), by consistently sticking to your self-determined 3 variables, every trading day, self-disciplined. Because, in my opinion, the rediscovered bond market is still not a real alternative to (long-term!) equity investments. And also in the form of CFD`s.

The growing interest in the emerging markets, primarily in China, is striking.
US Wall Street is again being perceived predominantly positively, while there is little hope for us in Europe in the short to medium term. Also for my home country Germany. Leading friendly Swiss strategists have in principle remained overweight in their own hard currency since the beginning of the year. And some global equities continue to be overweight, while government bonds from industrialized countries remain at a neutral level. However it is, and/or however may be; all in all, the concerns about the economy among professionals are growing noticeably, with the thesis often being advanced that a recession is not yet certain despite a
slowdown in growth. Swiss bankers concede that the risk of recession has increased: “Economic indicators have weakened in the US and Europe due to the tightening of the financial environment, such as in the interest-rate-sensitive US housing market. Rising energy and food prices are reducing real disposable income and depressing consumer sentiment worldwide. Nevertheless – and although the growth forecasts for the USA and Europe have been lowered – a recession in the next twelve months remains a risk, but does not correspond to the baseline scenario,” a Swiss friend of mine recently confirmed to me. Who avoids public life “I don’t want to contradict. But I would like to add that China remains on a different growth path as the renewed restrictive Covid-19 measures have put the brakes on an economic recovery for the time being. The Chinese economy is now being further strengthened by extensive monetary stimulus. And a lower one at that Key interest rate, which is still above the current rate of inflation. And thus the purchasing power of the Chinese population remains guaranteed. Which should be the basis for the coming and forthcoming economic upswing for China, for the year 2023.“

In any case, compared to the usa, compared to germany, in the eu trade zone, china has an better basically starting point for the next years. That’s why my Swiss friends recommended that I formulate a 4Xsetup of isolated Swiss stocks, even Chinese stocks! But I truly lack the courage. Although my Swiss friends are still saying I`m competent enough to get it. Also thanks to my realistically optimistic character. Sorry! Don`t test me to say no; i also answer. At the moment I don’t even dare to formulate 4XSetUps for individual shares from my home country Germany! Swiss and or also Chinese stocks? Yes, but not today, and not tomorrow! Sometime later? Promised! But when? I don’t know that! I won’t promise you anything I can’t keep…
DEVISE 2 DAY 48h
– My Last Thoughts About Market Price Actions

This week, the Fed’s FOMC Minutes are overshadowed by the Bank of England, which is to be expected from central banks. Because the British central bankhas to clean up politics. The new British Prime Minister is causing chaos on the financial markets with her budgetary policy. Which is jazzed up by most colleagues, in the newspapers (all around the world). Because Biden has been pursuing such a policy with his Democrats for 2 years. But the focus is on her, in London. However, that`s why the Fed is forced to raise interest rates due to high US inflation. But without publicly, openly criticizing US fiscal policy, let alone misguided economic policy – FED Boss Powell is far too polite for that.

Next to the Bank of England this week, all attention this week should be on Thursday’s US inflation numbers. A better-than-expected figure for the Sep`22 should then possibly counteract the bears’ pressure on the stock market. In addition, us producer prices on wednesday as well as us retail sales on friday should not be ignored either. So that we can get a better picture of the us economy over the weekend. UK unemployment rate on Tuesday is equally important. As well as inflation rate and trade balance from China, on Friday.

In OIL_BRENT, CBOT_MINI-YM1! & DXY we currently have open 4XSetUps. And EURUSD, GBPUSD, US10Y, XLF & MSFT we should watch mainly this week to get a feel for the financial market price action mainly. And/Or US Dollar, Euro, British Pound, US Basis Yield – even 10Y, US Bank Stocks, and/or US Techs.
DEVISE 2 DAY 48h
– Some Last News About Market Price Actions

hRussian Stocks Gain For The 3rd Session
The ruble-based MOEX Russia index closed slightly above the flatline at 1,955 on Thursday, extending minimal gains for the third session but failing to significantly rebound from the five-year low hit on Monday as investors continued to monitor worsening geopolitical tensions between Moscow and the West and its impact on the Russian economy. Recent data from the Ministry of Finance showed that Russia’s budget surplus sharply narrowed in September while the current account surplus fell in Q3, providing further evidence that lower energy exports to Europe and the retreat in energy prices continue to reduce Moscow’s revenues. This session, oil producers closed in the green after Deputy Prime Minister Novak said the government couldincrease capacity of ports to bolster seaborne oil exports instead of pipelines to combat decreasing energy revenues. On the other hand, Gazprom booked losses for the fifth session.

Brent Crude Turns Positive
Brent crude futures pared earlier losses and hovered above $96 per barrel on Thursday, halting three consecutive sessions of declines as the dollar rally lost steam. Still, contracts are on track to drop more than 4% on the week amid increasing signs of poor demand and positive news for supply. Data by the EIA pointed to a 9.9 million barrel increase in US crude oil inventories for the week ending October 7, well above expectations. The administration also warned that the world economy is even more likely to fall into a recession after OPEC+ announced an output cut of 2 million bpd. The projections mirrored those of OPEC from earlier this week, slashing global oil demand forecasts for 2022 and/or 2023 by 460,000 and 360,000 barrels per day, respectively, citing high inflation, stalling growth in developed economies, and China’s Covid lockdowns. Also, hotter than expected inflation in the US ramped up bets that the Federal Reserve could be even more aggressive in raising interest rates.

DXY Falls Sharply as Risk Sentiment Returns
The dollar index fell as much as 1% to almost 112 on Thursday as risk sentiment returned to markets as investors were digesting the latest inflation report. US inflation eased less than expected in September to 8.2%, and underlying prices excluding energy and food prices accelerated to a new four-decade high. Following the CPI report, the index rose sharply hitting 113.8 but turned negative shortly after as the US stock market regained ground. This dollar’s weakness was seen across the board, with some of the most pronounced selling activity against the British pound, which rallied sharply on news that talks were underway over whether to make a U-turn on some of the measures of the mini-budget that caused a historic market turmoil.DEVISE 2 DAY 48h
– Where I Was Wrong, Where I Was Whright

The USD more or less (still) on the upside. Oil prices up nearly 20% last week. And the stock market with an historically high volatility, in which 1.000 points in the Dow Jones Industrial Average Index is no longer a headache price action. When was it even more exciting? When was it even more volatile? However, I could have been writing this for weeks!

For a year now, Nourinel Roubini has argued yet, that the increase in inflation would be persistent, and that its causes include not only bad policies but also negative supply shocks, and that central banks’ attempt to fight it would cause a hard economic landing. „When the recession comes“, he warned, „it will be severe and protracted, with widespread financial distress and debt crises. Notwithstanding their hawkish talk, central bankers, caught in a debt trap, may still wimp out and settle for above-target inflation. Any portfolio of risky equities and less risky fixed-income bonds will lose money on the bonds, owing to higher inflation and inflation expectations.“ In fact, we have had stagflation in the USA since the middle of last year 2021. Because since July 2021, inflation has been higher than GDP in the same month. According to the formula: Inflation Rate (since July 2021) – GDP Annual Growth Rate (of the same Quarter, even since 3Q2021) = Stagflation. And that`s why the US yield curve in Chicago has become more expensive since then, since the FED cannot and does not want to sit idly by and look at it. And that’s just as well. But that’s why it’s also bad for stock markets in New York. Whether it will be a “long, ugly recession and a correction in equities, by around 40%“, as Roubini feared, remains to be seen at this point. Which is why we should keep this fact in the back of our mind. Because it obviosusly hides a positive future economic perspective! No doubt…

Anyway!
The price of oil had not reckoned with such a strong recovery last week. So there is a real danger this week not only of losing our booking profits again, but possibly also closing our short 4XSetUp in the oil price. And/Or wait and see again. With respect to the USD, we pull the ripcord at 110 points on our 4Xsetup. And let’s go long above back again if it’s just a brief pullback. Because we have experienced a huge movement so far. That`s why aour new stop price at 110 points in the DXY, this week. Because as more I think about it, I get cold feet. I don’t know if this is my personal, individual, subjective fear of my own courage!? And/Or may be also veteran experience to take profits in time?!