2022/10/12 (087) 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!
At the moment, the mood is dominating the courses.
And/or the courses the mood at least as far as the development on the US stock market, on US WallStreet, is concerned. Which puts off many of my readers, as I recently had to state with some surprise in a few emails. But also institutional investors I know, who earn their living by managing their fund, are reducing some stocks of bonds, shares and/or above all cryptos. Sometimes the us wallstreet is no longer fun! Will that change? Eventually, for sure; only it is currently still completely open when the time for the recovery will come. And above all why? Because the rate hike cycle is over? Because the inflation rates, at a low level, will not rise again in the future? Because the economy is growing above average again? The unemployment rate remains at historic lows? And trade balances around the world get bigger and bigger and bigger again, as nothing happend? First and foremost, the Russia/Ukraine war is a financial catastrophe for us in our so-called West! No problem. But the people in Eastern Ukraine pay with their lives, leave their homeland if they can, in order to live a monetary material life, like us – in our so called west! What is our political response to this? This is the crucial point that the USA, we in the EU, and or even China have to solve! And that at the negotiating table, in the form of bilateral trade agreements that must be adhered to in a civilized manner. As civilized as before the war, it should also be civilized after the war. Because what is the alternative? Right, uncivilized war…
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 bank has 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
Gold Snaps 5-Day Losing Streak
Gold extended gains to above $1,675 an ounce on Wednesday, snapping a five-day losing streak as the dollar paused after the FOMC minutes. Policymakers reiterated the need to keep raising rates and maintain them elevated for a period of time to bring down inflation. Still, several participants noted the importance to calibrate the pace of further policy tightening to mitigate the risk of significant adverse effects on the economic outlook. Investors are also bracing for key US inflation print on Thursday, which could add to bets for afourth 75 bps rate hike by the Fed in November. Gold is down almost 20% since its March peak after the Federal Reserve started hiking rates aggressively to tame sky-high inflation.
DXY Falls after FOMC Minutes
The dollar index erased gains but held above 113 on Wednesday, after several Fed officials said it would be important to calibrate the pace of further policy tightening to mitigate the risk of significant adverse effects on the economic outlook, the minutes of the Sept. 20-21 meeting showed. Still, many participants emphasized the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action. Investors now focus on Thursday’s CPI print, which could add to market bets for a fourth 75 bps rate hike by the central bank in November. The latest data showed that producer price growth rose by a more-than-expected 0.4% in September, rebounding from the decline in August and adding to the urgency for the Fed to tame inflation. Moreover, the dollar continued to benefit from strong demand for haven currencies due to a highly uncertain outlook amid geopolitical tension, with the IMF slashing its 2023 growth forecast for the global economy.
FTSE 100 Closes At Over One-Year Low
Equities in London extended losses for a sixth consecutive session on Wednesday, with the benchmark FTSE 100 closing at an over one-year low of around 6,840, dragged by financials and utilities. UK’s economy appears to be in recession after recent figures showed it unexpectedly contracted in August, underscoring Prime Minister Liz Truss’s challenge to meet her promises to shore up growth. Investors also kept a close eye on gilts markets, with headlines suggesting that the Bank of England could extend bond purchases had calmed the nerves earlier. However, the central bank confirmed that gilt purchases would end on Friday. On the corporate side, JD Sports Fashion plunged almost 10%, the most on the FTSE 100, on news that its CFO will step down next year. Barratt Developments, Britain’s largest homebuilder, dropped over 6% after warning of a drop in annual profit following a plunge in reservations.
European Shares Fall On Wednesday
European equity markets closed in the red on Wednesday, with the German DAX falling 0.2% and the benchmark Stoxx 600 retreating 0.3% as losses in retail and bank shares more than offset gains in consumer stocks. Netherlands-based health technology company Philips was the worst performer, down by 12%, after the company issued a third-quarter profit warning. Also, Credit Suisse declined more than 4% on reports that the US Justice Department is investigating whether the lender continued helping US clients hide assets from authorities. Investors digested fresh producer price data for the US that showed a bigger-than-expected rise last month, raisingagain further concerns that interest rates will need to continue to rise fast. At the same time, bond yields edged higher as investors digest some confusing news about BoE’s plans to end the bond-purchasing programme on Friday.
Russian Stocks Edge Higher
The ruble-based MOEX Russia index closed marginally higher at 1,953 on Wednesday, extending last session’s rebound from the five-year low hit on Monday as investors continued to monitor the worsening geopolitical crisis and its effect on the Russian economy. Among the latest blows, 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. Concerns that state can’t finance its budget deficit and its increasing war chest previously drove policymakers to suggest heavy tax increases to collect over RUB 3 trillion in the next three years, pressuring commodity-backed shares. In this session, Gazprom shares tanked the fourth session after Moscow said it could also raise taxes on LNG exports.
Brent Crude Pulls Back Toward $92
Brent crude futures fell toward $92 per barrel on Wednesday, extending losses into a third day on concerns about of weaker oil demand. OPEC said in its October report that oil demand will increase by 2.64 million barrels per day, or 2.7%, in 2022, down 460,000 bpd from the previous forecast. That was the fourth time that the group cut the oil demand forecast. The cartel also cut its 2023 forecast by 360,000 bpd to 102.02 million bpd. The downward revision follows last week’s move by OPEC+ to make their largest cut in output since 2020. The report also showed OPEC output rose by 146,000 bpd to 29.77 million bpd in September, led by Saudi Arabia and Nigeria. Still, OPEC is pumping far less than called for by the OPEC+ agreement amid a lack of investment.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?!
good morning, good day, and/or good night
at whatever time, wherever you are !
right here right now :