Increasing the US debt ceiling
The next "black" swan may be a situation where Democrats and Republicans cannot agree on increasing the debt ceiling.
Recall that such a situation occurred in June 2011. Then, the Republicans, who occupied the House of Representatives, did not agree to increase the US national debt without reducing significant budget expenditures. As a result, there were heated debates on this issue, which led to the fact that on August 4, 2011, the S&P rating agency lowered the US credit rating from "AAA" to "AA+". After that, the indices fell by 15%.
The current political and economic situation is close to 2011 - the Republicans occupy the House of Representatives and are not happy with the economic policy of the Biden administration. It is worth noting that the current speaker of the lower house of the United States was elected 15 times!
The next "black" swan may be a situation where Democrats and Republicans cannot agree on increasing the debt ceiling.
Recall that such a situation occurred in June 2011. Then, the Republicans, who occupied the House of Representatives, did not agree to increase the US national debt without reducing significant budget expenditures. As a result, there were heated debates on this issue, which led to the fact that on August 4, 2011, the S&P rating agency lowered the US credit rating from "AAA" to "AA+". After that, the indices fell by 15%.
The current political and economic situation is close to 2011 - the Republicans occupy the House of Representatives and are not happy with the economic policy of the Biden administration. It is worth noting that the current speaker of the lower house of the United States was elected 15 times!
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Кому нравятся истории сравнения нынешнего графика с прошлым, то сообщаем, что сценарий 1973 г. все еще в силе - двойная вершина на техническом отскоке на отметке 4050$ и затем сползание вниз
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What could take off in 2023?
At the beginning of last year, we wrote (here and here) about 2 reliable assets that could be held in 2022. These were Exxon Mobile and Waste Management. The first made +100% in a year, the second +5%, excluding dividends paid.
This year, we expect growth from other assets:
1. Gold-related assets. 2023 is the year of gold.
Therefore, gold mining stocks are a good investment choice for this year ($NEM, $GOLD).
For aggressive investors, you can consider $JNUG.
2. Assets directly correlated with US bond yields (for the first half of 2023).
For aggressive investors, such instruments could be $TBT and $TMV
Most analysts expect bond yields to fall as the Fed slows the pace of rate hikes and plans to cut them in the future. We, on the contrary, expect a significant increase in bond yields within the first half of the year due to the US government debt turmoil and persistent inflation.
Chickens are counted in the fall
At the beginning of last year, we wrote (here and here) about 2 reliable assets that could be held in 2022. These were Exxon Mobile and Waste Management. The first made +100% in a year, the second +5%, excluding dividends paid.
This year, we expect growth from other assets:
1. Gold-related assets. 2023 is the year of gold.
Therefore, gold mining stocks are a good investment choice for this year ($NEM, $GOLD).
For aggressive investors, you can consider $JNUG.
2. Assets directly correlated with US bond yields (for the first half of 2023).
For aggressive investors, such instruments could be $TBT and $TMV
Most analysts expect bond yields to fall as the Fed slows the pace of rate hikes and plans to cut them in the future. We, on the contrary, expect a significant increase in bond yields within the first half of the year due to the US government debt turmoil and persistent inflation.
Chickens are counted in the fall
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J. Powell, what have you done?
Yesterday, the market's main puppeteer announced his decision to raise the interest rate by 0.25%.
The markets shot up without any brakes on this news and Powell's subsequent comments.
What did he say?
Basically, nothing new:
⁃ the labor market is strong, we will raise the rate until we see it weaken
⁃ we are not considering lowering the rate this year
⁃ we will consider "a couple more" increases before the pause
So why did the markets jump up?
In our opinion, this is the market's reaction to a fait accompli - Powell spoke, did not say anything new and terrible, so we can breathe a sigh of relief and have fun. Also, the phrase "for the first time we saw the economy's reaction to our actions" could have played a role, which could have perked up the markets.
We believe that the Fed is taking a huge risk by not raising the rate by 0.5%. If inflation returns in the coming months, the Fed will have to raise the rate sharply, as it did in the 1980s. And then a soft landing is out of the question. The risk of stagflation is increasing.
We still believe that the current growth is temporary, however, we cannot assume that we are smarter than the market!
The market is approaching key levels, which technically indicate that when broken through, it is necessary to cover shorts and turn into Long.
For a decline, we use inverse ETFs, which are safer than the short itself. However, they have a decay in time, so it is not recommended to hold them for too long.
What are we going to do?
For now, let's see how the market reacts until the end of this week, when the key levels (4150-4200) are broken through and fixed, we will fix the loss. But we will do it wisely - with a ladder and a parallel purchase in Long. This approach will significantly reduce the loss with further market growth, and at some point even turn into profit. But even if the market falls later, it will allow you to make a profit from it.
But we'll talk about this later, for now we'll watch👀
If you think that a long-term upward trend has begun on the market, then it's better to fix the loss now and go Long. We think that we'll see 3200 faster than 4500 on the S&P.
The main thing is not how to enter a trade correctly, the main thing is to exit it correctly.
Yesterday, the market's main puppeteer announced his decision to raise the interest rate by 0.25%.
The markets shot up without any brakes on this news and Powell's subsequent comments.
What did he say?
Basically, nothing new:
⁃ the labor market is strong, we will raise the rate until we see it weaken
⁃ we are not considering lowering the rate this year
⁃ we will consider "a couple more" increases before the pause
So why did the markets jump up?
In our opinion, this is the market's reaction to a fait accompli - Powell spoke, did not say anything new and terrible, so we can breathe a sigh of relief and have fun. Also, the phrase "for the first time we saw the economy's reaction to our actions" could have played a role, which could have perked up the markets.
We believe that the Fed is taking a huge risk by not raising the rate by 0.5%. If inflation returns in the coming months, the Fed will have to raise the rate sharply, as it did in the 1980s. And then a soft landing is out of the question. The risk of stagflation is increasing.
We still believe that the current growth is temporary, however, we cannot assume that we are smarter than the market!
The market is approaching key levels, which technically indicate that when broken through, it is necessary to cover shorts and turn into Long.
For a decline, we use inverse ETFs, which are safer than the short itself. However, they have a decay in time, so it is not recommended to hold them for too long.
What are we going to do?
For now, let's see how the market reacts until the end of this week, when the key levels (4150-4200) are broken through and fixed, we will fix the loss. But we will do it wisely - with a ladder and a parallel purchase in Long. This approach will significantly reduce the loss with further market growth, and at some point even turn into profit. But even if the market falls later, it will allow you to make a profit from it.
But we'll talk about this later, for now we'll watch👀
If you think that a long-term upward trend has begun on the market, then it's better to fix the loss now and go Long. We think that we'll see 3200 faster than 4500 on the S&P.
The main thing is not how to enter a trade correctly, the main thing is to exit it correctly.
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Friends!
Would you use a free bot in Telegram that, based on technical analysis (resistance and support levels, volatility, oscillators, etc.), would send notifications on opening and closing a deal?
Such a kind of AI Investor with transparent online statistics on its deals and with good visualization.
Would you use a free bot in Telegram that, based on technical analysis (resistance and support levels, volatility, oscillators, etc.), would send notifications on opening and closing a deal?
Such a kind of AI Investor with transparent online statistics on its deals and with good visualization.
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A wave of bankruptcies is underway in the US In January 2023, 21 companies with total liabilities to creditors of $50 million went bankrupt in the US.
This is the highest figure since 2010. This is worth keeping an eye on. Currently, many companies are highly integrated with each other. The bankruptcy of one company can drag down the others.
This is the highest figure since 2010. This is worth keeping an eye on. Currently, many companies are highly integrated with each other. The bankruptcy of one company can drag down the others.
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A wave of bankruptcies is underway in the US
In January 2023, 21 companies with total liabilities to creditors of $50 million went bankrupt in the US.
This is the highest figure since 2010.
This is worth keeping an eye on. Currently, many companies are highly integrated with each other. The bankruptcy of one company can drag down the others.
In January 2023, 21 companies with total liabilities to creditors of $50 million went bankrupt in the US.
This is the highest figure since 2010.
This is worth keeping an eye on. Currently, many companies are highly integrated with each other. The bankruptcy of one company can drag down the others.
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Think 7 times and cut 1 time
▶️ Media giant Disney $DIS to cut 7,000 employees and $5.5 billion in expenses
▶️ Fintech service Affirm $AFR to cut 19% of its staff
Companies that spent a lot of money on increasing their staff during the Covid period are starting to cut their staff at a rapid pace.
High interest rates are starting to not only reduce consumer spending, but also increase the cost of borrowing.
One of the cheapest ways to raise capital is to issue.
In a period of high interest rates, the first to issue will be small-cap companies with negative cash flow and a low share of cash in their accounts.
Be careful, study the reports, especially at the current time.
▶️ Media giant Disney $DIS to cut 7,000 employees and $5.5 billion in expenses
▶️ Fintech service Affirm $AFR to cut 19% of its staff
Companies that spent a lot of money on increasing their staff during the Covid period are starting to cut their staff at a rapid pace.
High interest rates are starting to not only reduce consumer spending, but also increase the cost of borrowing.
One of the cheapest ways to raise capital is to issue.
In a period of high interest rates, the first to issue will be small-cap companies with negative cash flow and a low share of cash in their accounts.
Be careful, study the reports, especially at the current time.
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Search War
We believe that everyone has already heard about the popularity of the ChatGPT bot and the presentations of new search engines from Microsoft $MSFT and Google $GOOG
Let's dwell on another important aspect of this topic. Who is the main beneficiary of the search engine battle?
Apple! $AAPL
Yes, exactly, Apple. Let's figure it out.
Based on the results of the companies' presentations, we can conclude that Microsoft's Bing AI search engine looks more advanced than its competitor's. However, Google is currently almost a monopoly among search engines. But what does Apple have to do with it, you ask?
It will be a revelation for many that Google pays Apple $20 billion a year to have its search engine installed by default on iOS.
A significant breakthrough by Microsoft in developing an AI search engine and good competition with Google will prompt Apple to conclude a new contract on good terms.
We believe that Apple will ask for significantly more than $20 billion a year from Google.
Microsoft will have a chance to become Apple's top search engine. But how much will they be willing to pay for it?
We believe that everyone has already heard about the popularity of the ChatGPT bot and the presentations of new search engines from Microsoft $MSFT and Google $GOOG
Let's dwell on another important aspect of this topic. Who is the main beneficiary of the search engine battle?
Apple! $AAPL
Yes, exactly, Apple. Let's figure it out.
Based on the results of the companies' presentations, we can conclude that Microsoft's Bing AI search engine looks more advanced than its competitor's. However, Google is currently almost a monopoly among search engines. But what does Apple have to do with it, you ask?
It will be a revelation for many that Google pays Apple $20 billion a year to have its search engine installed by default on iOS.
A significant breakthrough by Microsoft in developing an AI search engine and good competition with Google will prompt Apple to conclude a new contract on good terms.
We believe that Apple will ask for significantly more than $20 billion a year from Google.
Microsoft will have a chance to become Apple's top search engine. But how much will they be willing to pay for it?
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CPI:
AMERIPRISE 5.8%
BANK OF AMERICA 6.1%
SCOTIABANK 6.1%
BARCLAYS 6.2%
CREDIT SUISSE 6.2%
JP MORGAN 6.2%
GURGAVIN CAPITAL 6.2%
TD SECURITIES 6.2%
WELLS FARGO 6.2%
VISA 6.3%
BMO 6.4%
GOLDMAN SACHS 6.4%
MORGAN STANLEY 6.4%
SMBC NIKKO 6.7%
MEDIAN 6.2%
AMERIPRISE 5.8%
BANK OF AMERICA 6.1%
SCOTIABANK 6.1%
BARCLAYS 6.2%
CREDIT SUISSE 6.2%
JP MORGAN 6.2%
GURGAVIN CAPITAL 6.2%
TD SECURITIES 6.2%
WELLS FARGO 6.2%
VISA 6.3%
BMO 6.4%
GOLDMAN SACHS 6.4%
MORGAN STANLEY 6.4%
SMBC NIKKO 6.7%
MEDIAN 6.2%
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Friends!
As we wrote earlier, we expect the US stock market to start falling sharply by mid-February. Technically, the main fall should coincide with the fall of the Chinese market, and we advised taking profits on Chinese stocks at 13950-14050 for China A50.
Let's get back to the US. We believe that yesterday's fall at the end of the trading day may be the beginning of that expected fall. But it's too early to talk about it.
The key level is 3980. The level after which we can safely say that it has begun.
We would also like to note the growth in the yield on US bonds (10-Y and 30-Y). We wrote that we believe in growth in the first half of the year. Our bet on $TMV gave 15% in a month, and we continue to hold it in our portfolio.
A breakthrough of the 4% yield level on ten-year bonds does not bode well for the markets. This is something to watch closely, it's a litmus test right now.
Next week is a key week for the market, so be especially careful, but don't make any hasty decisions!
As we wrote earlier, we expect the US stock market to start falling sharply by mid-February. Technically, the main fall should coincide with the fall of the Chinese market, and we advised taking profits on Chinese stocks at 13950-14050 for China A50.
Let's get back to the US. We believe that yesterday's fall at the end of the trading day may be the beginning of that expected fall. But it's too early to talk about it.
The key level is 3980. The level after which we can safely say that it has begun.
We would also like to note the growth in the yield on US bonds (10-Y and 30-Y). We wrote that we believe in growth in the first half of the year. Our bet on $TMV gave 15% in a month, and we continue to hold it in our portfolio.
A breakthrough of the 4% yield level on ten-year bonds does not bode well for the markets. This is something to watch closely, it's a litmus test right now.
Next week is a key week for the market, so be especially careful, but don't make any hasty decisions!
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Friends!
Key levels are 3980 for S&P500 and 4% for 10-year bonds.
Be careful! It's better to watch now
Key levels are 3980 for S&P500 and 4% for 10-year bonds.
Be careful! It's better to watch now
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Friends!
If we break through 3980 and consolidate, then the next key resistance is at 3750.
But for now we are watching, there is a fierce battle for the trend.
Perhaps for some time we will walk in the channel 3980-4050. A breakthrough upwards can give a jump to 4300, a breakthrough downwards - 3750
Watch the yield on 10-year bonds, it will show the movement of indices before anyone else
If we break through 3980 and consolidate, then the next key resistance is at 3750.
But for now we are watching, there is a fierce battle for the trend.
Perhaps for some time we will walk in the channel 3980-4050. A breakthrough upwards can give a jump to 4300, a breakthrough downwards - 3750
Watch the yield on 10-year bonds, it will show the movement of indices before anyone else
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Is inflation returning?
According to updated data, inflation in France and Spain has resumed growth since the beginning of the year.
The main reason is the growth in oil and food prices.
According to analysts' forecasts, inflation in the US will decrease by 0.2% in February.
However, we are not so optimistic. Based on the analysis of prices for oil products, mass-produced goods, and services, we calculated that inflation in the US will grow by at least 0.1% in February.
If the growth is even higher and inflation by the end of February will be around 7%, then the Fed will raise the interest rate by 0.5% at the next meeting, which will significantly collapse the market.
At the moment, the market does not include this scenario in its prices, and perhaps in vain...
According to updated data, inflation in France and Spain has resumed growth since the beginning of the year.
The main reason is the growth in oil and food prices.
According to analysts' forecasts, inflation in the US will decrease by 0.2% in February.
However, we are not so optimistic. Based on the analysis of prices for oil products, mass-produced goods, and services, we calculated that inflation in the US will grow by at least 0.1% in February.
If the growth is even higher and inflation by the end of February will be around 7%, then the Fed will raise the interest rate by 0.5% at the next meeting, which will significantly collapse the market.
At the moment, the market does not include this scenario in its prices, and perhaps in vain...
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