Money Guide
2023 Threats' status updates. Also: Indicators, Weekly Agenda, News, Musings, Opportunities
In this issue: raising interest rates, liquidity drying up, unheeded pessimism, and a few thoughts on 2023 Threats’ status updates
Money Guide is a personal project, supported by paid-subscriptions. I hope that all readers find the news timely and relevant, the musings interesting, the opportunities attractive, and my thoughts enriching and provoking
Indicators
Previous update: January 30th, 2023
🟢 positive mid-term forecast*
🔴 negative mid-term forecast*
⚪ neutral mid-term forecast*
🟩 positive past-period performance
🟥 negative past-period performance
⬜ neutral past-period performance
▲ increase during past-period
▼ decrease during past-period
─ no change during past-period
Click here for an in-depth look at how to read the Money Guide Indicators
🔒🟩▼ US Inflation: *6.50%* (vs 7.10% 11/22)
🔒🟥▲ US Funds Rate: *4.75%* (vs 4.50% 11/22)
🔒🟥▲ US 02Y T-Note: *4.23%* (vs 4.15%)
🔒🟩▼ US 10Y T-Note: *3.52%* (vs 3.53%)
🔒🟥▲ DXY index: *102.99* (+1.0% vs 101.92)
🔒⬜─ EURUSD: *1.08* (0.0% vs 1.08)
🔒🟩▼ EU Inflation: *9.20%* (vs 10.10% 11/22)
🔒🟥▲ EU Funds Rate: *2.50%* (vs 2.00% 11/22)
🔒🟥▲ USDMXN: *18.91* (+0.8% vs 18.76)
🔒🟥▲ MX Inflation: *7.82%* (vs 7.80% 11/22)
🔒🟥▲ MX Funds Rate: *10.50%*(vs10.00% 10/22)
🔒⬜─ MX 1Y Cetes: *11.10%* (vs 11.10%)
🔒🟥▼ DJIA: *33898* (0.0% vs 33909)
🔒🟩▲ S&P500: *4135* (+1.6% vs 4070)
🔒🟩▲ NDQ100: *12577* (+4.4% vs 12047)
🔒🟩▲ RUT: *1987* (+4.4% vs 1903)
🔒🟩▼ GSCI: *574.52* (-5.6% vs 608.90)
🔒🟩▼ Brent Oil: *85.67* (-2.5% vs 87.85)
🔒🟩▼ Gold: *1864* (-3.3% vs 1927)
🔒🟥▼ BTC: *22936* (-3.4% vs 23744)
🔒🟥▼ ETH: *1629* (-1.0% vs 1645)
🔒|🟩 Overall
******* ******** ** **** ** ********** ******* ** *********** ******* **** ****** **** **********, ****, ***, ******** ******** **** **** ************ ******** *** ** *** ********, *** ********** *********** ******** **** **** ** ****.********** ** *******, *** **** ***** ** * **** **** *****, *** ****** ******** ******* **** ******** ****** *** ******* ***** ** * ******* *******.** ******* * ************* ********* ** ****** ****** ***** **** **** ***** ** ********* ** *** ** ***** *********.*** *** ***** ** * **** ******🔒*
*Forecasts and Analysis in this section are available only in the premium edition of Money Guide for paid-subscribers. To be better informed, you need more than just past performance indicators
Weekly Agenda
All times are US ET (GMT-5)
Monday, February 6th
22:30 🔒 AU RBA Interest Rate decision
(Current: *, Expected: *)
Tuesday, February 7th
21:00 🔒 US State of the Union address
Wednesday, February 8th
-
Thursday, February 9th
02:00 🔒 DE Inflation Rate reports
(Previous: *, Expected: *)
14:00 🔒 MX Interest Rate decision
(Current: *, Expected: *)
20:30 🔒 CN Inflation Rate reports
(Previous: *)
Friday, February 10th
10:00 🔒 US Consumer Sentiment report
Q4 Earnings reports during the week
*Forecasts and additional information in this section are available only in the premium edition of Money Guide for paid-subscribers
News
📰 🔴 The US Federal Reserve raised rates. Chair Powell says it’s ‘premature’ to declare victory against inflation | The Federal Reserve raised rates by 25 basis points, or 0.25 percentage point, as was widely expected. Federal Reserve Chair Jerome Powell then held a news conference, in which he said that the economy’s disinflationary process had started (link)
📰 🔴 ECB raises rates, signals at least one more hike | The European Central Bank raised interest rates by 0.5% on Thursday and explicitly signalled at least one more hike of the same magnitude next month, reaffirming it would stay the course in the fight against high inflation (link)
📰 🟥 Gold demand surged to 11-year high on 'colossal' central bank buying | Key to the surge was a 55-year high of 1,136 tons bought by central banks across the year, the industry-backed group revealed, noting that the majority of these purchases were “unreported” (link)
📰 🟢 The US Economy added a whopping 517,000 jobs last month | The shockingly strong monthly jobs gain -a number that several economists cautioned was influenced by seasonal factors and is subject to future revisions- bucks a trend of five consecutive months of moderating job growth during the latter half of 2022 (link)
📰 🔴 Tiger Global cuts fundraising target as startup market cools | Prolific startup investor is aiming to raise $5 billion, less than half its initial ambition (link)
📰 🟢 Bitfinex expects El Salvador Volcano Token issuance this year | The government of President Nayib Bukele wants to use $500 million of the money raised to help build a tax-free coastal town known as Bitcoin City that would use geothermal energy from a nearby volcano for mining digital coins. Another $500 million would be used to buy Bitcoin, with any appreciation in the digital currency ultimately shared with investors, according to Bukele’s plan (link)
📰 🔴 Crypto miner Marathon Digital made first Bitcoin sales as token soared in January | The firm disposed of 1,500 coins in January and said in a statement that it would continue to sell some of its Bitcoin holdings this year. Battered by low Bitcoin prices and soaring energy costs, most mining firms made an about-face on their holding strategy and sold coins to aid liquidity (link)
📰 🟥 Cyberattack Sends Derivatives Trading Back to the 1980s | Shops clearing trades were forced to process deals manually. Incident highlights importance of a little known software firm (link)
Musings
💭 🔴 Stocks will crash as 'perfect bull market cocktail' ends: investment chief | In an interview with Insider, the CIO of Gateway Credit Partners explains why stock valuations are set to crash as global productivity declines (link)
💭 🔴 Black Swan’s Taleb warns ‘Disneyland’ is over for investors | A generation of near-zero interest rates triggered a monumental series of asset bubbles and turbocharged inequality. Investors are largely unequipped for a high-interest world as the Federal Reserve raises rates to levels more compatible with history, he said. Taleb described a generation of investors who over the past 15 years forgot the importance of cash flow as the financial crisis unleashed a wave of easy money (link)
💭 🔴 Black Swan fund manager sees markets in ‘tinderbox-timebomb’ | Universa Investments, the hedge fund advised by “The Black Swan” author Nassim Taleb, told clients that ballooning debts across the global economy are poised to wreak havoc on markets rivaling the Great Depression (link)
💭 🟥 Hindenburg bet against Adani puzzles rival US short sellers | Hindenburg's bet has been lucrative so far. Its allegations, which the Indian conglomerate has denied, have wiped out more than $80 billion of market value from its seven listed companies and knocked billionaire Gautam Adani from his perch as the world's third-richest man (link)
💭 🔴 NFTs Coming to Bitcoin sparks handwringing about Crypto Purists | While Bitcoin miners, who process and validate data on the blockchain, welcome the invention since it can boost fees for them, critics are concerned an influx of new trading volume may crowd out other financial transactions (link)
Opportunities
💡 Bloomberg: Here’s where to invest $10,000 right now | Four seasoned investors share ideas on where to find the best investment opportunities today (link)
💡 Top bond fund bets markets are wrong on rates, again | The London-based firm’s Global Sovereign Opportunities Fund is short US, Japanese and Italian rates, according to Chief Investment Officer Mark Dowding. He sees a market that is complacent about policy makers’ willingness to keep hiking borrowing costs (link)
💡 The Secret to EV Success Is the Software | Following Tesla’s lead, Volkswagen is building out expertise in-house to avoid the fate of the original cellphone makers (link)
💡 Breakup of Google’s ad business would reshape $500 billion sector | If government prevails, an asset spinoff is thought to be more likely than a sale (link)
A few thoughts on…
2023 Threats’ status updates
A couple of months ago, I wrote about the 2020 bull market, and high (still, in my opinion) market valuations. I’ve been echoing the same opinion in the Indicators section of this and previous Money Guide newsletters:
For a while, I’ve been thinking about an economic reckoning during the first quarter of 2023. Some sort of “reality check” that puts things back to a reasonable state, washing the last remnants of the exhuberance seen during the previous bull market. Currently, we are dealing with the lingering effects of the pandemic and some new problems, mainly the Ukraine War and its consequences for global trade. That has already been discounted (sort of) within the current prices. What could surprise us in the near future, during 2023?
(Click here to read the full piece)
With a focus on 2023, let’s go over the list of possible threats and see where we’re at, keeping in mind that many of these items are closely related and are subject to systemic behaviours.
🔴 Lengthening and/or worsening of the war in Ukraine
There is no end in sight, rhetoric is escalating and external intervention too
There’s a sense that another turning point is approaching in Russia’s war in Ukraine
🔴 Shortage of food and/or commodities
The S&P Commodity Index (GSCI) and Oil have been trading within a range, but there are worries of shortages for 2023
⚪ Q42022 corporate reports
Q4 2022 earnings reports have been mixed. 70% of companies have reported above estimates, but that is lower than the 10-year and 5-year averages. Earnings declines are expected for Q1 2023, but earnings growth for Q2 2023
🔴 Supply-chain issues
We appear to be in the midst of a reconfiguration of world trade. There are always opportunities, although it will probably take time for balance and optimization to be achieved again
🟢 Bond liquidity problems
For a long time, there have been worries about liquidity in times of crisis. 2022 brought real-life stress tests to many bond markets, especially sovereign ones, and the verdict seems to be positive. Liquidity was always there when it was needed. However, Japanese bonds can become a problem if the Bank of Japan changes its policies significantly
⚪ New international conflicts (US vs China, US vs Russia, Middle East, East Asia)
US-China tensions have been a constant and will probably continue like that throughout 2023. War doesn’t seem likely in 2023
US-Philippines Military Base Agreement Aimed at Countering China in War Over Taiwan
What to make of the US military’s movements in the Pacific and a general’s wild warning about war
⚪ New local conflicts (US, Latin America, Europe, Iran, China)
There are always local crises happening around the world. These ones could spill beyond their own borders, disrupting trade and igniting new conflicts, but they appear to stay contained during 2023
Political crises might impact Latin America's economy, IMF team warns
Iran protests: What caused them? Are they different this time? Will the regime fall?
Is the polycrisis already here?
Some analysts are now refering to a polycrisis. At Davos, during the World Economic Forum, “polycrisis” was the buzzword. Maybe we have been in a polycrisis state for decades. As we all know, in an interconnected world (system) such as ours, all (or most) parts are related, and any crisis can influence others. I think we shouldn’t focus on the labels, and instead we should focus on the situations that are already signaling trouble ahead, while at the same time keeping an eye on developments on other fronts.
For the time being, disruptions to global trade of commodities and corporate earnings (and related decisions, such as layoffs) will stay at the top of my list.
take care, have fun, be chill
-SM
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