2022/12/27 (135) Column

Zombie companies could trigger
new economic crisis


So-called zombie companies could trigger a new economic crisis in the USA in the coming year 2023. The danger is currently not posed by a single company but rather by the many zombie companies, i.e. those whose earnings are simply not sufficient to shoulder the interest burden. That´s why I was already on the sell side of the NASDAQ at the beginning of this year 2022, during the simultaneous outbreak of Russia’s war of aggression in eastern Ukraine. And in retrospect, our successful, profitable short 4XSetUp proved us right. Because many technology companies, listed above all on the NASDAQ, are still unable to refinance their liabilities from their profits, let alone cash flow, despite the low interest rates.

“In the past, various studies have already described up to 15 percent of all companies in the OECD countries as so-called zombies,” as the well-known economist Noruiel Roubini reported. And their numbers are likely to soar in 2023 as they need to refinance at what are now soaring interest rates. Even companies that still earn investment grade creditworthiness now have to pay six percent interest for new borrowed capital, which is three times what it was two years ago. Which, to say the least, should put no less pressure on the fundamental numbers of stocks on the NASDAQ throughout 2023. So for me, at the end of 2022, for the beginning of 2023, it can only mean: If long in the stock market in 2023? Then only in the Dow Jones! Because we find any zombie companies, if any, at least, in this index. When and at what price to get long again in the Dow Jones Future, even CBPT_MINI-YM1!, more and/or less in each upcoming D2D Edition, next year 2023…

DEVISE 2 DAY 48h
– My Last Thoughts Abot Market Price Actions

This week looks set to be a relaxed week in terms of new old central bank informations. Only the South American Central Bank of Uruguay, the BCU (Banco Central del Uruguay) will hold its regular monthly meeting again on Friday – and publish its interest rate decision. The major central banks of the most traded currencieswill not meet again until next year, 2023. The BOI and also NBP start next week. On Monday, the 2nd the BOI (Bank of Israel) wilö start the yeaor 2023. Following, by the Poland`s NBP (National Bank of Poland) on Wednesday, the 4th. As one of the major central banks. Our long GBPUSD 4XSetUp trading capability closed in profit last week. So that we currently have no open 4XSetUp in the forex market. After we were also able to make a very good profit in DXY in the course of 2022. For a new long 4XSetUp trading capabolity in GBPUSD i would wait until next days and/or weeks.

However, in the last week of 2022 the focus will shift to stocks as there would be very few important economic releases. Investors are hoping that the stocks will stage the Santa Claus rally, bringing some respite to the markets. In the US, housing data and several regional PMI readings will take center stage. Also, Japan will release retail sales, industrial production, and unemployment rate while in South Korea, Spain, and Russia the focus will be on inflation rates. In the Financial Markets 4XSetUps I have put once again 5 more stocks from our german DAX40 index, this week. As well as XETR-MRK (Merck) on sunday, XETR-MTX (MTU AERO AUTOTEILE) on monday, XETR-MUV2 (MUENCHENER RÜCKVERSICHERUNG) on tuesday, XETR-PAH3 (PORSCHE) on wednesday, an/or XETR-PUM (PUMA) on thursday, you can get an detail overview of until 18 different pov`s (point of views) about the price action of every single share. As far as the Technical Analysis 4XSetUps are concerned, i will focus us only to the Dow Jones Industrial Average Index, the Dow Future, CBOT_MINI-YM1!, this week. Since we were ripped out of all 4XSetUps, last week. So let us first formulate our basic expectations for 2023, this week.
DEVISE 2 DAY Another 48h
– Some Last News About Market Price Actions

Russian Stocks Gain for 4th Session
The ruble-based MOEX Russia index closed 0.6% higher at 2,151 onTuesday with support from miners and metallurgists while investors continued to monitor dividend news, as Russia’s clouded macroeconomic backdrop provides limited opportunities for profits in equities despite strict capital controls to limit selling pressure. Norinickel, Severstal, and Mechel all added more than 1% in the session, benefiting from expectations of stronger base metal demand in top consumer China amid its Covid reopening. Metal exporters were also supported by the ruble’s slide past 70 per USD, making its goods more appealing to the foreign market. Banks also booked gains, extending yesterday’s rally triggered by signals of strong profits from major lender Sberbank.

European Stocks Close on High Note
European equities gained ground on Tuesday, with the pan-European STOXX 600 closing around 430 points, driven by gains in the consumer discretionary sector, on optimism about China’s reopening. The world’s second-largest economy announced that it would stop requiring inbound travelers to go into quarantine starting from January 8th ahead of the Chinese New Year holidays, marking another significant step in the country’s reopening efforts and boosting market sentiment. Investors are also hoping for an end-of-year rally after markets got whiplashed this month by hawkish signals from major central banks that fueled fears of a global recession next year. Domestically, the benchmark DAX 40 added 0.5% to end around 14,000 points, driven by gains among energy stocks.

Spain Stocks on the Rise as China Eases Covid Curbs
The IBEX 35 gained 0.4% to trade around 8300 on Tuesday after an extended Christmas weekend and in line with its European peers, as the global sentiment turned hopeful amidst China’s further Covid-19 curbs relaxation. The world’s second economy announced it would start lifting the quarantine requirements for inbound visitors on January 8th after three years of border controls. Almost all the companies advanced, with the biggest gains coming from Repsol (1.9%) and Banco Santander (1.5%). Among the few decliners were GRIFOLS (-3.1%), Almirall SA (-1.6%), and DIA (1.5%).

Italian Shares Underperform on Tuesday
Italy’s FTSE MIB index pared earlier gains and closed marginally below the flatline at 23,855 on Tuesday, underperforming other major European equity benchmarks after investors returned from a long weekend as investors awaited the Senate’s vote on the Italian government’s Budget Law for 2023. The budget is worth over EUR 30 billion, within EU framework rules but well above previous plans asthe government will ramp up financial support for households to combat higher energy bills. Tech and utility shares closed in the red with STMicroelectronics and ERG dropping 1% and 2%, respectively. On the other hand, Moncler shares jumped over 3% after top consumer China announced plans to reopen its economy from Covid restrictions.

CAC 40 Outperforms European Peers
Equities in Paris enjoyed some respite on Tuesday, with the benchmark CAC 40 outperforming its European peers by adding roughly 0.7%, driven by gains in consumer discretionary and energy stocks, as investors welcomed the news that China will ease further its coronavirus restrictions. China-exposed luxury firms LVMH and Hermes were among the top performers, up over 2% each.

SENSEX Rises for Second Session
Equities in India advanced for a second consecutive session on Tuesday, with the S&P BSE SENSEX adding more than 1% to close just shy of 61,000 points and tracking a broad rise in Asian markets on optimism about China reopening. Investors were also upbeat after the British Consultancy said in its annual World Economic League Table 2023 that India’s GDP annual growth rate is expected to average 6.4% over the next five years. Metal stocks outperformed on news that China will further ease its strict coronavirus restrictions, with Tata Steel adding more than 6% to lead the SENSEX index.

China Stocks Climb on Reopening Boost
The Shanghai Composite rose 0.98% to close at 3,096 while the Shenzhen Component gained 1.16% to 11,107 on Tuesday, rising for the second straight session after China announced that it will end quarantine requirements for inbound travelers starting on Jan. 8, sparking hopes for a faster economic recovery. Investors also digested data showing industrial profits in China fell 3.6% year-on-year in the January-November period, reflecting economic disruptions brought by Covid restrictions. Property, industrial and commodity-linked stocks led the charge.

Crude Oil Erases Session Gains
WTI crude futures pared early gains to hover at $79.5 per barrel on Tuesday after forecasts of moderate weather and news that some US refineries are expected to resume operations quickly eased fears of low supply after Artic blasts in the region halted output. The retreat in prices was limited as the prospect of a production cut by Russia in response to Western sanctions kept supply concerns prevalent. The major exporter may reduce output by 5% to 7% in early 2023, the RIA news agency reported citing Deputy Prime Minister Alexander Novak.DEVISE 2 DAY 48h
– Where I Was Wrong, Where I Was Right

A super exciting year 2022 is coming to an end! And regardless of our (not) successful 4XSetUps trading capabilities, I would like to thank each and every reader here. Because if you, yes you, didn’t read my DEVISE 2 DAY daily, every day, then financing my newspaper wouldn’t be worth it for me. Let alone for my nine online brokers.

For the last week I will focus on the DJI (Dow Jones Industrial Average Index); even the Dow Future, the CBOT_MINI-YM1!. Nevertheless, I will also want to give us a detailed overview of the GBPUSD pair again. But don’t want to formulate new 4XSetUps trading capability. Because I think it would make more sense to let the last week expire first. And then in January 2023, sooner or later, go long/short again.

Anyway, the DJI (Dow Jones Indistrial Average Index) was the best stock market in the US last year 2022. And that, fundamentally argued, quite rightly so. Because the least vulnerable companies are listed in this  stock market, which many colleagues refer to as zombie companies. So as a company that cannot refinance your liabilities and interest from earnings let alone cash flow. Because that is one of the most crucial fundamental points of every stock valuation in an environment of higher interest rates. And that’s why I generally prefer the DJI (Dow Jones Industrial Average Index) over the NASDAQ for 2023 again. Because I perceive a lower downside risk in the DJI than in the NASDAQ. Precisely because of the refinancing problems that have just been formulated for many technology companies that are listed in the NASDAQ. However, we will observe, analyze and evaluate in every issue, including in 2023, how far the DJI can rise and/or perform better than the NASDAQ in 2023. To formulate new old 4XSetUp trading capabilities regularly…