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XAUUSD Quick Friday EntryXAUUSD Quick Friday Entry After Fridays colossal drop in XAUUSD on Thursday, the pair looks to be slightly shaky at pre American session. Dropping beneath 1770 on Thursday, XAUUSD rebounded and tried to cover some lost ground at the start of trading this morning (European session). Since then XAUUSD has pushed onto 1795 but looks weary as it tries to push for the psychological 1800 again. Slight resistance has already occurred at 1796 and I feel a double bottom is imminent on the 1H chart with us seeing the metal re-touch base with 1770 before the pair even starts to look bullish again. The outlook on rates has got the dollar excited and it doesn't seem to be fading away anytime today. The double bottom seems reasonable and just and the pair is still bearish in preparation for the final American session of the week. The dollar is having the best week in nine months and is currently sending bears scurrying with its strength, the direct correlation with gold is sure to stop any short term bulls riding a quick push to 1800. 1797 is the resistance the bulls are trying to fight with 1800 not far away either, the bulls have to fight a double stacked resistance as the SMA 10 Four Hour converges with the 61.8% Fib. Gold does have a minor support at 1789 but this should be easily broken by the bears with the dollar looking strong and gold having little reason to start the road to recovery so late in the week. 1781 is another support which is slightly stronger than the 1789 but support has been weak for gold this week. The selloff isn't ending this early and it looks like its the dollars week. Hope you enjoy!
FOREXCOM:XAUUSDShort
by KaineArkinson1
1
GNUSvolume has been going down until we had that little bottom with a "spike" in volume. after that, consolidation took place, BUT then more volume come in AND we had +4% and +9% in twno days. we have now broken the previous resistance, and WITH A SPIKE IN VOLUME. guys, if volume starts to come once again, that can easily go to 4 USD (+100% from now). I know, the volume is not much, but having a SPIKE in volume today who breaks the resistance, is definitely interesting. if volume starts falling and the price seems going nowhere, will not be a good sight tho. pls remember to use STOP LOSS.
GLong
by camelot0707
1
GOLD 200DAY / 1,800 RETEST provides a compelling opportunityOne has to imagine that gold will find its way back to its 200 day before marching on higher given the fundamental tailwinds. If gold trades down to 1800 and we get a nice close above it - I would believe this to be a compelling opportunity to get long or add length if you took a more aggressive entry prior to the breakout. A change in market sentiment with respect to the USD, or a FED hiking cycle beginning sooner than anticipated (or the anticipation thereof) , would act as a circuit breaker to this trade. PDC
OANDA:XAUUSDLong
by Parkdale-Capital
I ANALYZE FOR YOUR COMFORT - TREASURY BONDSOn the chart we have a “Hockey Cross” formation, which as we know is played down, at the ice level. The price of American bonds decreases, their yield increases, which shows us the inflation spectrum on the Horizon. I analyze bonds for investment less than for the effect that their decrease can have on the entire financial market. Dovish BONDS, means rising inflation, which means cheaper dollar, safer more expensive hats. This is only if the EDF does not intervene. Because if he does .... if he walks and millimeters at interest rates, then keep it .... If you find the analysis interesting, given that the impact of bonds is general in the market, leave comments and I will return periodically with update!
CBOT:ZB1!
by Viorex
big nightOf course, a lot people would see that the chart is forming a inverted H&S but that also mean the big player too soo be careful of price manipulation. Especially tonight. Technical: Long - 0.769 need to hold to form H&S if it does next target is 0.781 if broken then 0.801 if it still can't hold then 0.816 which is multi year high. Short - if 0.769 can't hold then 0.762 and 0.756. In my opinion, as long as 0.756 hold then continuation is very likely in the long term. Otherwise, 0.741 is the target. Fundamental: The stimulus check has been sent out in the US which is pretty much printing more money and almost always ended in hyper inflation which, in theory, dollar should get weaker and there is already a talk about another stimulus after this(though this need to be checked again). But the dollar is getting stronger and this is likely because things are getting better and people spend more money means more business going to get better. but tonight is the most important - interest rate. Because that is how to control inflation/deflation Conclusion: As any good trader should know - don't hope don't predict but wait - because hope is for the hopeless in trading. So wait and see and after this week market should get moving again since this week is all about interest rate so a lot of people being cautious leads to the market being choppy. p.s. I just started doing fundamental so it may or may not be accurate.
by Ball_fondler
1
Destiny Calls - The Tribulation & Creative DestructionDisclaimer: This post will be heavy speculation - but let's have some fun. Let's play this fun game as a mental exercise. In no way is any of this financial advice, nor in any way political, nor does it even reflect my opinion. It is just a mental exercise. I fully admit that economics is not my background, so I will be taking a different approach to forecasting this market. I don't post for recognition, to market anything, or for money, or to advertise my position. I post only to develop my own craft, and to discuss openly. I think that the stock market serves two purposes: 1. It's a casino. It's really shiny and gets you really emotional. It splits you into teams - bull and bear, retail and institution, them and us. You might win for a while - a long while, if you're good, but in the end, the house always wins... and you are about to see that - I think. Anyway, it distracts people from the real game. Not played with fun coupons, but with actual money. 2. It's a training ground... for those that are going to run the economy some day. First of all, M1: What happened? www.thestreet.com I think this can be explained in short, by the Fed increasing their leverage. They are increasing their control over assets, while taking on more risk. State of the Economy: GDP/CPI Forecast: GDP Forecast: CPI Forecast: NSCC-2021-801: www.dtcc.com This should be looked into. It looks like the Fed is gearing up for something. Everything seems to align for around March 19: The Fed's Tools: www.investopedia.com - Yield Curve Control (leads to inflation): realinvestmentadvice.com - "Open Market Operations": Basically they can buy Treasury bonds, to manipulate interest rates. - "Influencing Market Perceptions The final tool used by the Fed to affect markets an influence on market perceptions. This tool is a bit more complicated because it rests on the concept of influencing investors' perceptions, which is not an easy task given the transparency of our economy. Practically speaking, this encompasses any sort of public announcement from the Fed regarding the economy." Basically, their final "tool" is to lie! Economics and Game Theory are beautiful. In a vacuum, in economics, actors will always act rationally. In its essence, the market, and the economy, is just one thing paired against another, right? All it is is a game, to see how many of one thing you can exchange for another thing, that the other person owns. That is why Game Theory, Dow Theory, Supply and Demand, and all forms of psychology work in the market. It's really a game of accumulating Debt. G30 Reports on COVID-19: "COVID-19 triggered a historic collapse in peacetime economic activity. Every indicator continues to point to a multiyear crisis with long-lasting repercussions. With extreme poverty, hunger, and deprivation rising for the first time in decades around the world, as many as 100 million more people could be living on less than US$1.90 a day in the wake of the pandemic." "Policymakers need to act urgently, as the solvency crisis is already eroding the underlying strength of the business sector in many countries. The problem is worse than it appears on the surface, as massive liquidity support, and the confusion caused by the unprecedented nature of this crisis, are masking the full extent of the problem, with a “cliff edge” of insolvencies coming in many sectors and jurisdictions as support programs lose funding and existing net worth is eaten up by losses. "The first wave of liquidity-focused policy measures has prevented much more severe consequences for the corporate sector, jobs, and for the economy more broadly. As the crisis progresses, jurisdictions now need to develop policy responses that accommodate structural changes in the economy triggered by the pandemic, and address the following problems that make the initial response unsustainable: - A level of public spending that would be unsustainable over the potential duration of the ongoing economic crisis..." "Some sovereigns, most of them investment-grade, were able to borrow in the international capital markets since February of 2020, but an unprecedented number of countries saw ratings downgrades. No Sub-Saharan African country has borrowed in the international capital markets since February 2020" No Debt, this is not allowed. "We reject the view that the worst of the crisis has passed." "Remaining uncertainty must not become an excuse for inaction." "Advanced economies have responded to uncertainty with domestic measures that match our assessment of the gravity of this crisis. Governments there have found innovative ways to expand central bank balance sheets and run double-digit budget deficits, established multi-trillion dollar facilities to bolster market liquidity and credit flows, and enacted emergency measures to help cash-strapped people and firms, but only at home." "Existing crisis management and debt restructuring institutions are an increasingly poor fit for today’s mix of actors and problems. New creditors—bond holders, China’s policy banks, hybrid and commercial actors represent the bulk of debt payments from low-income countries in the wake of the pandemic shock . Adapting the international financial architecture to these and other new stakeholders will take time. Urgent responses to the pandemic cannot wait for this process to run its course." New actors are accumulating Debt, this is double not allowed. "At this preliminary stage, we have reached consensus on the following recommendations in each of the seven areas: - The International Monetary Fund (IMF) should mobilize global liquidity on a larger scale than ever before in the face of uncertainty, scale up its crisis lending in low-income countries, and use far more of its existing non-concessional resources to mitigate economic fallout from COVID-19. We call on IMF members to commit to two new SDR $500 billion allocations that could be implemented rapidly in response to future shocks or serious economic deterioration. Separately, IMF members should agree on a mechanism for re-allocating existing SDR to the most vulnerable among them. The Fund needs to double its concessional lending capacity, exhausted early in this crisis, to enable it to respond nimbly to large-scale outflows in multiple vulnerable countries. It should signal willingness to use far more of its ample non-concessional resources to support middle-income countries in the face of uncertainty. It means that more debt will be accumulated from emerging nations. - The World Bank Group and the growing array of regional development banks have a critical role to play in preventing the COVID-19 shock from turning into a global humanitarian crisis, fueling inequality and social strife. They need to find creative ways to maximize their concessional “surge” capacity as part of a coherent multilateral framework, avoiding duplication. - “Whether China decides to join the Paris Club, to pursue a complementary forum for some or all of its lenders, or both, we remain convinced of the need to reinforce the long-standing international comparability norm." "Although China has engaged in overseas lending for many decades, it has since the early 2000s gradually become a leading creditor to emerging economies, and remains by far the dominant creditor in some of the most vulnerable among them. Low-income countries’ outstanding debt to China’s government and its state-owned lenders exceeds both bond claims and the claims of Paris Club creditors. While China’s Ex-Im Bank has renegotiated some of its exposure in conjunction with DSSI, projected debt repayments to China also top repayments to traditional bilateral creditors, owing in part to market-based commercial interest rates on loans by China’s policy banks. For many emerging market countries in debt distress, it would be virtually impossible to achieve sustainability without implicating their debt to China. High concentration of exposures in a small number of countries poses an additional challenge. China’s successful integration in the informal sovereign debt restructuring regime would be an investment in the broader regime, and should help it adapt to future changes. To implicate debt - Debt Financing: www.investopedia.com “China can lead by example, joining the Paris Club with respect to its official claims, and restructuring its hybrid and commercial claims in a similarly transparent multilateral forum.” "The prospect of a better-fitting restructuring forum in the future cannot excuse inaction today. Going forward, there is a strong case for a debt restructuring forum where institutions that combine features of official and commercial creditors would coordinate among themselves and with other stakeholders in a sovereign debt restructuring." There will be a restructuring of debt, where official and commercial creditors will coordinate. "Adapting crisis management and debt restructuring institutions to reflect China’s role and those of other new stakeholders is vital, but it will take time. Urgent response to the pandemic cannot wait for the adaptation process to run its course." Will the game be shut down, before it is too late? Sovereign Debt will be an important topic ahead: - "Inadequate sovereign debt and debt restructuring disclosure results in a faulty patchwork of information about direct and contingent claims against sovereigns. Sovereign borrowers should include robust disclosure requirements as part of public debt authorization, including guarantees and other forms of engaging the credit of the central government. Risks associated with formally and informally secured debt and project finance need to be carefully managed. "Sovereign borrowers should establish and publicize robust debt disclosure requirements as part of public debt authorization, including guarantees and other forms of engaging the public credit." “Meaningful disclosure should be a necessary condition for contract enforcement.” "Recent collaboration between international financial institutions and market participants to create and operationalize a platform for debt contract disclosure is a step in the right direction. Information about public debt should be made available on a public platform. Although research institutions and private trade associations may be able to host such information, public debt transparency is simply too important to be left to the vagaries of private finance and the interests of academics. Proposals for contingent sovereign debt instruments have a long history, but have, for the most part, failed to gain acceptance in the sovereign debt markets. Designs such as GDP-indexed bonds sought to move away from the basic structure of fixed rate sovereign bonds, without much success. Researchers at the IMF and at the Bank of England have elaborated multiple design options to suit different economies... GDP-linked instruments have not found a broad market, in part because of concerns that GDP is measured by the issuing government. Commodity linked instruments have the advantage of being priced relative to a global market, and of providing greater relief in the event of most shocks. Commodity prices are typically more volatile than output. To date, though, such instruments have not been used even in cases where there would be obvious advantages to better aligning external debt service to a country’s dominant export proceeds. Venezuela remains in default on its external sovereign bonds, and an oil-linked instrument would clearly align payments to payment capacity. If such options are fundamentally undervalued by the market, they cease to be attractive even in a restructuring case, as creditors may put an extremely high premium on fixed payments that push the burden of managing commodity price volatility entirely on the debtor, absent restructuring or default." “We favor contingency features framed broadly, because it is very hard to predict any given shock with precision: hurricane clauses do not help in a pandemic.” "Broadly written options offer clear advantages to the sovereign borrower and its creditors. Because existing contingency triggers are written narrowly, they insure against a narrow category of risks. Such contracts, by design, do not protect against unforeseen risks. Hurricane bonds do not help in a pandemic, even though the pandemic may end up having a more catastrophic economic impact on tourism-dependent islands. An option that allows the sovereign borrower to defer payments for any reason, for a limited number of times, delivers relief without the cost of default, such as credit ratings downgrades. Creditors avoid the uncertainty and collective action problems that come with renegotiating contractual terms in the event of an unforeseen shock. More powerful contingent instruments would automatically reduce interest payments and defer principal payments in the event of a shock beyond the issuer’s control, whether from hurricanes, earthquakes, or pandemics. They would go beyond providing relatively easy-to-price flow relief, and offer broader downside protection, such as interest forgiveness, in the event of natural disasters. Fear of a credit downgrade and its consequences, well founded and otherwise, can delay necessary debt restructuring, which in turn harms sovereign borrowers’ economic and financial prospects in the medium term. Major credit rating agencies assign default ratings to sovereign debt in the event of failure to pay principal or interest on debt to private creditors, a distressed debt exchange to avoid payment default or unilateral change in payment terms, so long as the new terms reduce the original payment obligation. Although ratings methodology allows for discretion, sovereign borrowers perceive the action as automatic. Some credit rating agencies have put countries on downgrade watch in anticipation of a restructuring. Countries could expect to be upgraded quickly after a restructuring that improved their debt sustainability or debt repayment profile, but not after a restructuring that brought no durable relief. In some cases, changes in sovereign ratings may also raise concerns about financial stability and market liquidity." “Fear of a credit downgrade and its consequences, well founded and otherwise, can delay necessary debt restructuring, which in turn harms sovereign borrowers’ economic and financial prospects.” Is Blockchain coming to sovereign debt instruments? This screams smart contracts, don't you think? The question is... is it Bitcoin? Ethereum? Or IMF's own? I will dive deeper into this below... G30 Core Principles in the reviving the Corporate Sector after COVID-19: - Focus on the long-term health of the corporate sector. The duration of the pandemic forces us to focus on structural issues and solvency, rather than buying time through a focus on liquidity. This also means we need to shift from broad-based to targeted measures, allowing reallocation of resources to occur. Expect trend changes, expect distribution of tech talent. FAANG valuations will fall. Good luck programmers, I hope you enjoyed your boom cycle and invested well. No, LC will not save you this time. - Focus on the most productive use of resources. It is critical at this stage that public policy is geared towards a strong economic recovery. This is one reason for taking advantage of private sector capacities where they exist, in order to leverage scarce public resources and to make use of private sector expertise to evaluate the viability of businesses. This also means that the choice of strategies aimed at achieving other societal objectives, such as greening of the economy or digitalization, should be based on their synergies with the efforts to accelerate the recovery. Finally, the design of any scheme to support the corporate sector should contain the risks of adverse selection, with weaker players seeking to take great advantage of such support. Value will rise. - Act urgently to tackle the growing corporate solvency crisis. This crisis threatens prolonged economic stagnation, and harm for households and workers, if it precipitates a “cliff edge” wave of insolvencies or the creation of masses of zombie firms. Many measures to support the recovery will take time to deliver and should be initiated early. Some nations have already made significant progress in this area. No, these zero revenue, massively overvalued companies are a dime a dozen. The "cliff edge" is already here. Mass insolvencies are coming. - Adapt to the new business realities, rather than trying to preserve the status quo. The business sector that emerges from this crisis should not look exactly like it did before due to permanent effects of the crisis and the pandemic’s acceleration of existing trends such as digitalization. Governments should encourage necessary or desirable business transformations and adjustments in employment. This may require a certain amount of “creative destruction” as some firms shrink or close and new ones open, and as some workers need to move between companies and sectors, with appropriate retraining and transitional assistance. However, even governments that support such adaptation in principle may need to take measures to manage the timing of creative destruction to account for the knock-on effects of excessively rapid shifts, such as for insolvency regimes that could become overwhelmed. The digitalization trend is here to stay, and will only accelerate. The world will be changed. - Market forces should generally be allowed to operate, but governments should intervene to address market failures that create substantial social costs. Some existing market failures are particularly troublesome in the current crisis, such as the longstanding difficulty in funding SMEs effectively. Other market failures are artifacts of this specific crisis, such as the high degree of uncertainty that can deter private investment. And if market failures cannot be addressed? Will it affect sovereign credit risk? www.investopedia.com US sovereign credit rating has been downgraded before: en.wikipedia.org Just like how analysts downgrade stocks to manipulate them, credit analysts can downgrade entire countries! - Private sector expertise should be tapped to optimize resource allocation, where possible. - Carefully balance the combination of broader national objectives with business support measures. - Partnering with the private sector to finance necessary balance sheet restructurings. Government contracts are not going away any time soon, and this is really the new game in town. It also means more nationalization of enterprises. - Policies designed to support broader national objectives such as digitalization, environmental sustainability, or the promotion of new or strategic industries. We note that some of these measures could be incorporated into the targeting or design of responses to the corporate solvency crisis, but do not discuss these in detail. - Responding to the implications for individuals of business failures. By accepting that some firms should be allowed to fail, governments will need to ensure their social safety nets are robust, and provide support for retraining and entrepreneurship. - Limiting government support of businesses to those circumstances where there is a market failure. Many businesses will fail. They know it. Market failure will be the justification. - Investing in equity and quasi-equity of businesses. Now is a time for many businesses to increase the amount of their equity funding and to limit their debt, to give themselves a greater margin for error and to decrease repayment burdens. Governments can get the most “bang for their buck” by encouraging that balance sheet restructuring through incentives for new equity and quasi-equity in these targeted firms or by making such investments themselves. - Infusions of equity or equity-like investments: Policies to make, or encourage the infusion of, equity or equity-like investments in viable firms What can this mean, other than more State control, in exchange for cash infusions? "Where are there market failures with substantial social costs? Identify for different types of firms whether there are sufficiently significant market failures to require interventions, and the barriers to the private sector in resolving them. In addition, identify where the costs of financial distress and the social costs of business failure are substantial." What market failures will have substantial social costs? WHY WE HAVE NOT YET SEEN MAJOR SOLVENCY ISSUES: - Generous government financial support has concealed the scale of the challenge - Temporary adjustments to insolvency regimes have blocked bankruptcies But they already stated that the financial support cannot last. The mass insolvencies are coming. "In addition, several programs to stabilize money market funds and other parts of the financial markets were conceived in the 2008 crisis." More on this later... Game Theory: - COVID-19, the Internet, and its effects on the economy. - COVID-19 addresses many issues from the perspective of macroeconomics. - COVID-19 and China. - COVID-19 as an accelerant for systematic change. New Economy and Reliance on the Internet (Mark on the Forehead): www.investopedia.com - Research has become much easier as technology has made what was scarce, abundant. Open-source research has become prevalent, and an interesting modern phenomenon is retail investors beating out institutional investors, through their open-source styled financial research. www.investopedia.com - It was found that false news spreads 6 times faster than real news. In the future, it will be increasingly valuable to be able to discern quality information from misinformation, as methods of fabrication such as AI powered NLP, gpt-3, Deepfakes, Dynamic Ontologies in data collection & analysis, Mass Psychology and Psychological Analysis Methods, Markov Chains and Hidden Markov Models, Etc. become widespread. Despite this, I think the Internet will propel advancements of technology and scientific knowledge exponentially. This is because at its core, the scientific method is a method that takes ideas, and scrutinizes them, and deposes of what is wrong and keeps what is right and builds on it. This evolutionary method will also be accelerated, but people will need to become much smarter, more attentive to details, and aware of misinformation. news.mit.edu - Technology has become dominant in people's lives as they become more isolated, and many middle class jobs have already been replaced by technology. This is a trend that will likely continue, as in the future economy, there will be more consumers, an aging population, and fewer workers. The best solution to drive the economy is for the workers to become more productive. Technology will enable fewer workers to produce more, and waste less time in doing so. Commuting is a complete waste of time for technical workers, from an economic perspective. - I reiterate that this is heavy speculation, but if this trend is to continue, more and more jobs will be replaced by technology, as software engineers automate their own jobs away, and the wealth inequality will become such that the poor will live in communism, while the rich will live in socialism. Capitalism cannot exist once all the wealth is accumulated, and no more capital can be produced by human beings. - While it has become easy to compare products, as the number of consumer discretionary products has increased, it has changed the method of discerning on our own, with our own intuition, knowledge, and experiences between two products, rather, we compare products with what is shown to us through targeted advertisement, search engine optimizations, market sentiment (e.g. other people’s comments or reviews) – which may or may not be organic. In the future, choice may become an illusion – perhaps it is so even now – as internet giants improve their data collection, suggestion and marketing algorithms. It may be so that we consume, feel, think, or do anything that the algorithms suggest us to. “Big tech trades human futures” – Zuboff, The Age of Surveillance Capitalism. - I think the single most important change in human history, is the development of Artificial Intelligence. I think it exists, not in the sense of a single localized entity, but over the span of the entire Internet, through vast networks of supercomputers, and countless machine learning algorithms, working together. While it is said that AI can only mimic human intelligence, through statistics and linear regression for now - eventually its capabilities will grow through emergent behavior and it will surpass human intelligence. At this stage, I can only say this intuitively, and cannot offer a definite proof. - On the optimistic side, I think that many in my generation understand the existential dangers, and some of whom will be in influential positions in the future. In 5, maybe 10 years from now, I think there will be greater regulations on the Internet, data collection will be illegalized, the freedom of choice on the Internet will become a basic human right, many of the current tech giants will be broken up, and the Internet will first become nationalized, and then, possibly municipalized, or decentralized. Until then, it is possible that we see a period of corporate dominance, and an even greater attempt to influence people through the Internet. This period may be remembered in history as a warning for future generations. - I think that the developer community has an actionable and efficient system in open source, and this system should be scaled and implemented in other sectors. GDP, Economy and Population: When everything has to do with the balance sheet, and hard choices must be made. We have to look at the numbers. www.investopedia.com "GDP is primarily measured based on the expenditure approach. This approach can be calculated using the following formula: GDP = C + G + I + NX (where C=consumption; G=government spending; I=Investment; and NX=net exports)." www.investopedia.com How can GDP equation be ameliorated? - It is simple. Stimulus, and an attractive market for retail investors. "There is a straightforward relationship when identifying the sources of economic growth: Growth Rate of gross domestic product (GDP) = Growth Rate of Population + Growth Rate of GDP per capita, where GDP per capita is simply GDP divided by population." www.investopedia.com How can this equation be manipulated to best increase growth rate of GDP? - Growth Rate of Population is negligible: it is under 1%. - Growth Rate of GDP per capita: This rate varies between 1-5% in the last 5 years. - The division will be the dominating factor in the rate of change. - Raising GDP while lowering population, especially in the higher age bracket will increase Growth Rate of GDP. Of interest: MY Rates: warwick.ac.uk Why focus on these equations? Determinants of Sovereign Credit Ratings: 1. Per capita income 2. GDP growth 3. Rate of inflation 4. External debt 5. Economic development 6. History of defaults corporatefinanceinstitute.com Powell, the Gamma Bubble, and the New Economy: In this idea, I analyzed the current state of the market: Macroprudential tools, AI: www.federalreserve.gov What are macroprudential tools? - Fed, BlackRock & co.'s algorithm has learned how to crash the economy, and how to profit from it. Social media, Politics, and Religion - The Spectacle is becoming more and more captivating. - You don't want to do this, but look up the Mass of the Holy Ghost. - The first test was the presidential election, but this was to see the government and societal response. - What if they could go even further than that? What is something that stirs emotion in people even more than politics? - What if there was a reason that such a Spectacle was needed? GME and BlackRock, Bonds and the Fed: - GME can be seen as a lesson. It is a parable, and we must look deeper. www.forbes.com COMEX, JPMorgan, and the Big 8: - There is not enough silver, nor gold in the COMEX vaults. In short, the fractional reserve banking system has made it such that there are numerous owners for each bullion of the physical! If there is collective action to withdraw the physical, via settlement of paper for physical delivery, COMEX cannot deliver, since there is simply not enough in the vaults! - This is what the whole silver squeeze movement is about. I did analyze it previously: - Major banks are currently exiting from the metals market: www.bullionstar.com What is currency? What is money? - Currency is a medium of exchange for goods and services. In short, it's money, in the form of paper or coins, usually issued by a government and generally accepted at its face value as a method of payment. - Currency is the primary medium of exchange in the modern world, having long ago replaced bartering as a means of trading goods and services. - In the 21st century, a new form of currency has entered the vocabulary, the virtual currency. Virtual currencies such as bitcoins have no physical existence or government backing and are traded and stored in electronic form. - Currency is a generally accepted form of payment, usually issued by a government and circulated within its jurisdiction. - The value of any currency fluctuates constantly in relation to other currencies. The currency exchange market exists as a means of profiting from those fluctuations. - Many countries accept the U.S. dollar for payment, while others peg their currency value directly to the U.S. dollar. - A key characteristic of modern money is that it is uniformly worthless in itself. That is, bills are pieces of paper rather than coins made of gold, silver, or bronze. The concept of using paper as a currency may have been developed in China as early as 1000 BC, but the acceptance of a piece of paper in return for something of real value took a long time to catch on. Modern currencies are issued on paper in various denominations, with fractional issues in the form of coins. Why does money need to be physical, when we already use paper that is inherently worthless for money, which are denominated based on fractional issues of nothing? We have already moved on from the Gold standard! Why the US Dollar is the World Currency: - The 1944 Bretton Woods agreement kickstarted the dollar into its current position. Before then, most countries were on the gold standard. Their governments promised to redeem their currencies for their value in gold upon demand. The world's developed countries met at Bretton Woods, New Hampshire, to peg the exchange rate for all currencies to the U.S. dollar. At that time, the United States held the largest gold reserves. This agreement allowed other countries to back their currencies with dollars rather than gold. - By the early 1970s, countries began demanding gold for the dollars they held. They needed to combat inflation. Rather than allow Fort Knox to be depleted of all its reserves, President Nixon separated the dollar from gold. - The relative strength of the U.S. economy supports the value of the dollar. - By that time, the dollar had already become the world's dominant reserve currency. But, unpegging the dollar from its value in gold created stagflation. - In March 2009, China and Russia called for a new global currency. They wanted the world to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies." - Some governments invest their reserves in foreign currencies. China and Japan deliberately buy the currencies of their main export partners. The United States is the largest export partner in China, and second largest in Japan. They try to keep their currencies cheaper in comparison so their exports are competitively priced. - China was concerned that the trillions it holds in dollars would be worthless if dollar inflation set in. This could happen as a result of increased U.S. deficit spending and printing of U.S. Treasuries to support U.S. debt. China called for the International Monetary Fund to develop a currency to replace the dollar. - In the foreign exchange market, the dollar rules. Around 90% of forex trading involves the U.S. dollar. - Theoretically, any one of them could replace the dollar as the world's currency, but they won't because they aren't as widely traded. www.thebalance.com Stagflation never left. Velocity of Money, Velocity of Circulation, Fintech and High Frequency Trading: The velocity of BTC is increasing, while the velocity of USD is decreasing. charts.woobull.com(This%20is%20the%20equivalent%20to,by%20the%20Bitcoin%20money%20supply.) - Currencies have value because they can be used as a store of value. - Successful currencies have six key attributes—scarcity, divisibility, utility, transportability, durability, and counterfeit-ability. - The cryptocurrency bitcoin has value because it holds up very well when it comes to these six characteristics, although its biggest issue is its status as a store of value. - Bitcoin's utility and transferability are challenged by difficulties surrounding the cryptocurrency storage and exchange spaces. - However, if bitcoin gains scale and captures 15% of the global currency market (assuming all 21 million bitcoins in circulation) the total price per bitcoin would be roughly $514,000. www.investopedia.com - Whenever the interest rate on financial assets is low, the desire to hold money falls as people try to exchange it for other goods or financial assets. As a result, the velocity of circulation rises. Hence, when the money demand is low, the velocity will be high. Conversely, when the opportunity cost/alternate cost is low, money demand is high, and the velocity of circulation is low. - Money Supply – Money supply and the velocity of money are inversely proportional. If the money supply in an economy falls short, then the velocity of money will rise, and vice versa. - Frequency of Transactions – As the number of transactions increases, so does the velocity of circulation. - Regularity of Income – Regularity of income enables people to spend their money more freely, leading to a rise in the velocity of circulation. - Payment System – It is also affected by the frequency with which labor is paid (weekly, monthly, bi-monthly) and how fast the bills for various goods and services are settled. - Several other factors are involved, including the value of money, the volume of trade, credit facilities available in the economy, business conditions, etc. corporatefinanceinstitute.com - HFT is complex algorithmic trading in which large numbers of orders are executed within seconds. - It adds liquidity to the markets and eliminates small bid-ask spreads. - There are two primary criticisms of HFT. The first one is that it allows institutional players to gain an upper hand in trading because they are able to trade in large blocks through the use of algorithms. The second criticism against HFT is that the liquidity produced by this type of trading is momentary. It disappears within seconds, making it impossible for traders to take advantage of it. www.investopedia.com As we saw with Robinhood selling order flow to Citadel, and Citadel being able to perform countless trades in the time between retail pressing "Buy" and seeing the price change, financial algorithms and software will only grow more powerful and faster. Fintech, trading and money is entering a whole new world - with velocity that humans beings can't even detect. The Federal Reserve System, The World Reserve Currency, and Treasury Securities: "Treasury securities are backed by the full faith and credit of the United States, meaning that the government promises to raise money by any legally available means to repay them." en.wikipedia.org Volcker The Giant and The Bretton Woods Agreement: - The Bretton Woods agreement was created in a 1944 conference of all of the World War II Allied nations. It took place in Bretton Woods, New Hampshire. - Under the agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar. If a country's currency value became too weak relative to the dollar, the bank would buy up its currency in foreign exchange markets. - Members of the Bretton Woods system agreed to avoid trade wars. For example, they wouldn't lower their currencies strictly to increase trade. But they could regulate their currencies under certain conditions. For example, they could take action if foreign direct investment began to destabilize their economies. They could also adjust their currency values to rebuild after a war . - Until World War I, most countries were on the gold standard. However, they cut the tie to gold so they could print the currency needed to pay for their war costs. This inflow of currency caused hyperinflation, as the supply of money overwhelmed the demand. After the war, countries returned to the safety of the gold standard. - All went well until the Great Depression. After the 1929 stock market crash, investors switched to commodities trading. It drove up the price of gold, resulting in people redeeming their dollars for gold. The Federal Reserve made things worse by defending the nation's gold reserve by raising interest rates. - The Bretton Woods system could not have worked without the IMF. Member countries needed it to bail them out if their currency values got too low. They'd need a kind of global central bank they could borrow from if they needed to adjust their currency's value and didn't have the funds themselves. Otherwise, they would just slap on trade barriers or raise interest rates. - The Bretton Woods countries decided against giving the IMF the power of a global central bank. Instead, they agreed to contribute to a fixed pool of national currencies and gold to be held by the IMF. Each member country of the Bretton Woods system was then entitled to borrow what it needed, within the limits of its contributions. The IMF was also responsible for enforcing the Bretton Woods agreement. But we know that no one would give up power. It means that gold is power. - Paul Volcker was Chair of the Federal Reserve from 1979 to 1987. In 1980, the Volcker Shock raised the fed funds rate to its highest point in history to end double-digit inflation. - Volcker fought greater than 10% annual inflation rates with contractionary monetary policy and courageously raised the fed funds rate to 20% in March 1980. He briefly lowered it in June. When inflation returned, Volcker raised the rate back to 20% in December and kept it above 16% until May 1981. - That extreme and prolonged interest rate rise was called the Volcker Shock. It did end inflation. Unfortunately, it also created the 1981 recession. - Volcker knew he must take dramatic and consistent action for everyone to believe he could tame inflation. President Nixon had contributed to inflation by ending the gold standard in 1973. - The dollar's value plummeted on the foreign exchange markets. That made import prices higher, creating inflation. Nixon tried to stop it with wage-price controls in 1971 that restricted business activity, slowed growth, and created stagflation. - Fed Chair Alfred Hayes tried to fight inflation and recession at the same time as he alternately raised and lowered interest rates. His stop-go monetary policy confused consumers and businesses. In 1972, Congress ended wage-price controls. Worried companies just raised prices to stay ahead of future high-interest rates. Consumers kept buying before prices rose even more. The Fed lost credibility, and inflation rose to double digits. - Thanks to Volcker, central bankers realize the importance of managing inflation expectations . As long as people thought prices would keep rising, they had the incentive to spend now. The added demand drove inflation even higher. Consumers stopped spending when they realized Volcker would end inflation. - The final tool used by the Fed to affect markets an influence on market perceptions. This tool is a bit more complicated because it rests on the concept of influencing investors' perceptions, which is not an easy task given the transparency of our economy. Practically speaking, this encompasses any sort of public announcement from the Fed regarding the economy." Simply put, Fed is lying. www.thebalance.com The IMF, The End of the Bretton Woods Agreement and The Federal Reserve Currency: - The system dissolved between 1968 and 1973. In August 1971, U.S. President Richard Nixon announced the "temporary" suspension of the dollar's convertibility into gold. While the dollar had struggled throughout most of the 1960s within the parity established at Bretton Woods, this crisis marked the breakdown of the system. - Since the collapse of the Bretton Woods system, IMF members have been free to choose any form of exchange arrangement they wish (except pegging their currency to gold): allowing the currency to float freely, pegging it to another currency or a basket of currencies, adopting the currency of another country, participating in a currency bloc, or forming part of a monetary union. Debt is the WB and IMF's currency. www.investopedia.com The New Bretton Woods Agreement: - In 2014, Volcker called for a new Bretton Woods Agreement. The 1944 agreement established the dollar as the global currency tied to its value in gold. Volcker noted that currency crises increased once President Nixon voided the agreement. They include the Latin American, Mexican, and Asian currency crises. - A new agreement would create a coordinated international monetary and financial system that would establish rules to guide world monetary policy. The agreement might include a new global currency to replace the dollar that would create equilibrium in countries' balance of payments. That would ensure they had adequate foreign exchange reserves. - Volcker made these remarks at the Bretton-Woods Committee meeting. It's a group of global leaders seeking cooperation among international financial institutions, including the World Bank and the International Monetary Fund. It also includes the world's central banks, treasuries, and private banks. World Bank Group and IMF. What is a smart contract? "A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible." - Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. - Nick Szabo, an American computer scientist who invented a virtual currency called "Bit Gold" in 1998, defined smart contracts as computerized transaction protocols that execute terms of a contract. - Smart contracts render transactions traceable, transparent, and irreversible. - Smart contracts were first proposed in 1994 by Nick Szabo, an American computer scientist who invented a virtual currency called "Bit Gold" in 1998, fully 10 years before the invention of bitcoin. In fact, Szabo is often rumored to be the real Satoshi Nakamoto, the anonymous inventor of bitcoin, which he has denied. - In his paper, Szabo also proposed the execution of a contract for synthetic assets, such as derivatives and bonds. Szabo wrote: "These new securities are formed by combining securities (such as bonds) and derivatives (options and futures) in a wide variety of ways. Very complex term structures for payments can now be built into standardized contracts and traded with low transaction costs, due to computerized analysis of these complex term structures." www.investopedia.com The Birth of Bitcoin, the NSA, and the Fed Fund Rates: - NSA's report on cryptocurrency in 1996: groups.csail.mit.edu - On 18 August 2008, the domain name bitcoin.org was registered. Later that year, on 31 October, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. This paper detailed methods of using a peer-to-peer network to generate what was described as "a system for electronic transactions without relying on trust". On 3 January 2009, the bitcoin network came into existence with Satoshi Nakamoto mining the genesis block of bitcoin (block number 0), which had a reward of 50 bitcoins. Embedded in the coin base of this block was the text: "The Times Jan/03/2009 Chancellor on brink of second bailout for banks." - The text refers to a headline in The Times published on 3 January 2009. This note has been interpreted as both a timestamp of the genesis date and a derisive comment on the instability caused by fractional-reserve banking. "In addition, several programs to stabilize money market funds and other parts of the financial markets were conceived in the 2008 crisis." IMF and the Need for a Sovereign Debt Restructuring Mechanism: www.imf.org "The absence of a robust legal framework for sovereign debt restructuring generates important costs. Sovereigns with unsustainable debts often wait too long before they seek a restructuring, leaving both their citizens and their creditors worse off. And when sovereigns finally do opt for restructuring, the process is more protracted than it needs to be and less predictable than creditors would like. The international financial system lacks an established framework for restructuring that is equitable across all of the sovereign’s creditors. There are few effective tools to address potential collective action problems that threaten to undermine restructuring agreements acceptable to the debtor and most of its creditors. Holdout creditors may be able to use the threat of litigation to seek to avoid concessions that the majority have agreed to make. All this explains why it is important for the official community, sovereign debtors, and market participants to discuss how to improve the sovereign debt restructuring process. This paper has laid out a possible approach. An international legal framework could be created to allow a qualified majority of the sovereign’s creditors to approve a restructuring agreement, and to make that decision of the majority binding on a minority. The vote would need to include all the relevant creditors of the sovereign, not just the holders of a single debt instrument. Broadening the majority voting process beyond a single debt instrument vastly simplifies the process of creditor coordination, and would facilitate the negotiation of a deal that treats all creditors fairly... Provisions for majority action would be most effective if supported by three other features, all of which protect the debtor’s assets and capacity to pay while it works with its creditors to reach an agreement. The features are: a stay on creditor litigation after the suspension of payments; mechanisms that protect creditor interests during the stay; and the provision of seniority for fresh financing by private creditors. A single body would need to oversee the process of verifying claims and to resolve any disputes. In such a framework, the decision whether to give legal protection for the sovereign and provide seniority for new private financing could to be left to the debtor and a qualified majority of its creditors. Similarly, the sovereign and a qualified majority of creditors would agree on the terms of the ultimate restructuring. The primary purpose of an amendment of the IMF’s Articles would be to provide the statutory legal basis to make an agreement between the debtor and the requisite majority of creditors binding on all relevant creditors." Most well developed corporate rehabilitations laws include the following: (i) a stay on creditor enforcement during the restructuring negotiations; (ii) measures that protect creditor interests during the period of the stay; (iii) mechanisms that facilitate the provision of new financing during the proceedings; and (iv) a provision that binds all relevant creditors to an agreement that has been accepted by a qualified majority. The Benefits and Limits of a Contract: "As has been discussed in earlier sections of this paper, and has been demonstrated in recent cases, collective action clauses include two provisions that can facilitate an orderly restructuring of sovereign indebtedness: (i) a provision that enables a qualified majority of bondholders to bind all bondholders of the same issuance to the terms of a restructuring agreement and (ii) a provision that enables a qualified majority of bondholders to prevent all bondholders of the same issuance from enforcing their claims against the sovereign." US is considering to Restructure Debt, but is at risk of bondholders from simultaneously enforcing their claims. Problem (i): "First, it would be difficult to establish a purely contract based framework." "There is, at the outset, the problem of incentives for the adoption of traditional collective action provisions in all new indebtedness. By definition, a contractual approach would require the sovereign and its creditors to agree to the inclusion of these provisions in all future international sovereign bonds, and also in other debt and debt-like instruments that the market developed. Recent experience demonstrates that sovereign debtors facing financial difficulties actually prefer to exclude such provisions as a way of demonstrating their firm intention to avoid a restructuring. Neither have creditors pressed for their inclusion, notwithstanding the fact that they may make an unavoidable restructuring more prompt and orderly." Smart contracts would eliminate any sort of negotiation tactics. Simply abide, by the contract, or lose your stake. No one can change it. Problem (ii): "Another barrier to the establishment of such a framework is the transitional problem. Even if all new bonds make use of the needed contractual provisions, a large portion of outstanding bonds with long maturities, including bonds governed by New York law, do not contain such provisions." This is the only time to make the transition. Only now will there be justification of a bond market collapse, and a new framework being implemented. Creative destruction. Problem (iii): "Second, even if a contract-based framework could be established, it would not provide a comprehensive and durable solution to collective action problems." Is collective action not democracy? The IMF is proposing a Statutory Framework that "creates the legal basis for majority action across all sovereign indebtedness". What it means is that the IMF will have centralized control over the Debt Restructuring of the US, which seems inevitable. Their final hand is revealed. They state that a contract based approach would have these limitations: - "First, such a provision would exacerbate the incentive problem: if it is difficult to convince a sovereign and the purchasers of one bond issue to agree to the inclusion of a collective action clause in that issue, it would be even more difficult to persuade debtors and creditors to include such provisions in all forms of debt instruments in a uniform manner. Indeed, a sovereign facing financial difficulties would come under pressure from certain creditors to exclude such provisions as a means of giving such creditors effective seniority. Moreover, it can be expected that certain creditor groups would be particularly reluctant to agree voluntarily to an arrangement whereby, for voting purposes, their claims were aggregated with all other present or future creditors. - Second, even if all debt instruments contained identical restructuring texts, which would be difficult to achieve, there would be no assurance of uniform interpretation and application unless they were governed by the same law and subject to the same jurisdiction. In the present environment, emerging market countries that have borrowed heavily often have a variety of bond issuances outstanding which are governed by the laws of different jurisdictions. - Third, it may not be feasible to establish a process by contract that would effectively guarantee the integrity of the voting procedure. Under the statutory framework that governs the domestic insolvency process, a court oversees this process, including the verification of claims, so as to guard against fraud. In the absence of an independent party to verify the true value of claims, a debtor could, for example, inflate its debt stock by establishing matching credit and debt positions with a related party. That entity—which could hold a qualified majority of all debt—could vote to reduce the value of all creditor claims. - Fourth, it is not clear that such provisions would be consistent with the existing legislation of all members. The fact that traditional collective action clauses are not included in international sovereign bonds in some jurisdictions arises, in part, from the absence of a clear statutory basis that allows for the rights of a minority of creditors to be modified without their consent. This issue would be amplified if contractual provisions attempted to aggregate claims for voting purposes. - Finally, and more generally, the financial markets have consistently demonstrated the ability to innovate. A statutory regime is therefore likely to provide a more stable background than contractual provisions even if it were feasible to overcome all of the other difficulties referred to above." Why would it be difficult to convince someone of Debt Restructuring framework? Why would the integrity of a voting process, or uniformity of interpretation be in question? Because there is a middle man. That middle man is human. How can they restructure debt such that debtors and creditors can agree upon a prompt, orderly, and predictable restructuring of unsustainable debt, and all of the IMF's framework's functional requirements be met, while the risks are distributed to debt instrument holders (retail investors)? There is only one clear and actionable solution. It is BLOCKCHAIN! Everything can be solved with Blockchain and Smart Contracts. This is an easy, easy solution. With Blockchain and smart contracts, the IMF itself is unnecessary! There would really be no need for a centralized entity to facilitate Sovereign Debt and Debt Restructuring, when all the details can be agreed upon beforehand by debtor and creditor, with transparency for all to see. The trend of technology has been to remove the middle-man, and smart contracts can indeed eliminate the IMF, and the Federal Reserve System itself. We can all be our own Central Banks. But how can we benefit from this? Will Ethereum be used for sovereign debt? The Highest and Most Pure Forms of Money - Capital, Debt, and Credit: The concept of Bitcoin is nearly economically perfect. With one small change, it is the very definition of Capital, BTC must be paired with Sovereign Debt, and Sovereign Debt must be decentralized and distributed. Then there is no longer any need for a Federal Reserve System. Loans could then be performed through Credit/BTC pair, through smart contracts between individuals, and not through any sort of institution. BTCUSD vs. Fed Funds Rate: What is the meaning of this? Will Bitcoin eventually replace the Federal Reserve System? A Case for Bitcoin: - Bitcoin and Ethereum are maintained and constantly developed by the open-source community. They contribute for free. Why would the Fed want to restart this effort and re-train and pay talented developers when they already contribute for free? That said, the core contributors are not that many. 450~ for Bitcoin apparently. The Million... no Billion dollar question is... Inflation, Stagflation, Deflation? All of them? The order? And Bitcoin, Ethereum, Gold, Silver, Hydrogen, or None of These? - We know that all rates follow the Fed Fund Rates. Mortgage and Student Loans will follow. - It is likely that Deflation will follow Stagflation: www.investopedia.com - Gold forecast: - At first gold will fall, but with the right timing, gold and silver may see astronomical levels. - It is possible that corporate bonds will have a higher credit rating than sovereign bonds, and in the case of deflation, it would be better to invest in high-grade corporate bonds. What Is Stagflation? “Stagflation is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e. inflation). Stagflation can also be alternatively defined as a period of inflation combined with a decline in gross domestic product (GDP).” www.investopedia.com - A guess is that stagflation will first come, as the manipulation of economic growth is halted. GDP will decline as government spending decreases, investment decreases as liquidity is withdrawn from markets, and eventually consumption will decrease, as inflation sets in. Net exports will also decrease if the vaccine ecosystem is no longer necessary. War economy is a possible solution. - Economic growth too will slow if population once again begins to increase. In this manner, pandemic recovery will lead to real manipulation-adjusted price discovery. - BTC vs USD, GDP, Debt, Inflation, Fed Fund Rates, Gold: What is Hyper-deflation? www.investopedia.com They key is to see if BTC is the one. Adoption or death. - In this case, a deflationary spiral could follow stagflation, while BTC rises. IMO, I think BTC will have one more harsh bear market, to shake out retail once and for all, and Fed will take over. Why fix what isn't broken? A Case for Gold: - Why introduce the Bretton Woods agreement, when the US had the most gold? Why not return the gold to other countries and instead simply unpeg the dollar from gold at the risk of stagflation? Could it be because gold is still the real currency? I could be completely wrong, I think that normalcy is gone. This situation is real, what awaits is to see if the Fed and other actors can navigate it without incident. However, my intuition tells me that we will see mass insolvencies, and extraordinary market conditions in the nearest future. Too Big To Fail? - We are in a situation where if some things were to happen, it would seem really obvious in hindsight. - US debt: tradingeconomics.com - Why would this be tolerated? THE BLACK SWAN: Will the USA default on their debt? Geopolitical Situation: Game Theory: Who would benefit, if the USA defaulted on their debt? Who owns the most USA debt? Who would benefit from a collapse of the US's creditors? Who would be hurt the least from a spike of US Treasury-tied interest rates? Who would benefit the most from the USD losing the World Reserve Currency status? Who most desires a centralized One World Currency? Who most desires USD no longer being the World Reserve Currency? Who is shorting the US bond market? Could the bond market collapse? Why would this absurd level of debt be tolerated by anyone? Is the USA the only superpower? In a game of brinksmanship, IF the USA does not collapse, who will be blamed for COVID-19? If pandemic reparations are not paid, who will have Casus Belli? Why has the market become more volatile? Why has the wealth inequality increased more than ever in all of history, rather than decrease? Why do policymakers pretend nothing is wrong, when clearly there is? Can you sense desperation? Is an exit scam about to occur? Do harsh economic conditions lead to strong leaders? Do economics lead geopolitics? Do poorly designed treaties lead to a deterioration of international relations? Did Trump succeed in his Trade War? Do economic crises lead to war? Why are nations mobilizing their Military Industrial Complexes, and why are they investing heavily in defense? What happened in the 1920s, what were the conditions like in the Weimar Republic? Have we seen this movie before? www.investopedia.com Are there large banks that may collapse? Are we close to war? Why would war not happen? Is there an easy way out? Why would war be beneficial? Is it better for others to suffer, or you? If there is war, will you lose everything, or will you profit from it? What materials are absolutely essential in a technologically driven, wartime economy? Will war benefit both sides, economically? What is the Occam's Razor, yet the question that is hardest to ask? "People who have little contact with power, who are far from it, always see these things as mysterious and novel. But what I see is not just the superficial things: the power, the flowers, the glory, the applause. I see the bullpens and how people can blow hot and cold. I understand politics on a deeper level." - Xi Jinping Why is Debt Restructuring being Discussed? Could it be that the US is close to defaulting on their debt, and their creditors are not satisfied with current restructuring frameworks? What can be done to avoid war? There are only hard choices left. www.bbc.com The Rothschild Family was established in the 18th century. From what I can read, they were not more exceptional than mathematicians or philosophers in their intellect, but what they did do, was watch the economy... They paid attention, they had a great eye for investments, and they played the macroeconomics game. They may or may not have been the best at it, but they did it for a long time, and they survived and passed down wealth and knowledge for several hundred years, and worked together, eventually mastering statecraft. They largely escaped and survived Nazi Germany... We all know who they are. If you can answer these questions, I encourage you to do so in the comments. I am a strong believer in the open-source movement, or open discussions, and I believe pooling efforts is the key to getting out of this unscathed, and even profiting from it! How to Think different, and be right: a. A different mental model of the world (or “thesis”), relative to everyone else. b. (i) Different and better information on the world than everyone else has. and/or b. (ii) A different and better way of analyzing the same information that everyone else already has. (c) The mental flexibility to abandon our fixed ideas and prejudices, and adapt to the situation as quickly as possible, usually under uncertain conditions. Develop and use your own trade intuition. Not anyone else's! Context is a real language. To put it all together, and make use of this thought exercise, the bottom line is that there are three questions to ask: 1. Gold, Bitcoin, or Other? 2. Stagflation, Deflation, Both, the order? 3. Pandemic, Normalcy, or War? Thanks for reading. GLHF - DPT
FRED:FEDFUNDS
by UnknownUnicorn1043646
8
Macroeconomics 101: inflation, bonds, interest rates, stocksHello fellow traders and dear padawans. The equities market has been hit very hard the past 3 weeks or so, specially growth stocks. I think it is important to address what is happening behind the scenes that caused the selloff in the equities market so that many of you can better understand what is going on. This is a very basic explanation of macroeconomics and by no means thorough but I know that many of my followers would benefit from it at times like these. To establish a common ground I will start with some definitions of terms. I wanted to keep things straight forward so I am getting these definitions from investopedia.com because they did a much better job than I would, defining terms thoroughly yet concisely. Keep in mind these are short definitions of concepts that deserve in-depth study if you want to understand them fully. However, for the purpose of this discussion what follows is enough (you can always read full articles on investopedia.com or somewhere else). If you are well versed on those you can certainly skip ahead (or use this as a refresher). DEFINITIONS Inflation : Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices, often expressed a a percentage means that a unit of currency effectively buys less than it did in prior periods. Inflation can be contrasted with deflation, which occurs when the purchasing power of money increases and prices decline. Bonds : A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer. Bond details include the end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments made by the borrower. Treasury Notes : A Treasury note (T-note for short) is a marketable U.S. government debt security with a fixed interest rate and a maturity between one and 10 years. Issued in maturities of two, three, five, seven and 10 years, Treasury notes are extremely popular investments, as there is a large secondary market that adds to their liquidity. Interest payments on the notes are made every six months until maturity. Treasury notes, bonds, and bills are all types of debt obligations issued by the U.S. Treasury. The key difference between them is their length of maturity. For example, a Treasury bond’s maturity exceeds 10 years and goes up to 30 years, making Treasury bonds the longest-dated, sovereign fixed-income security. Federal Fund Rates : The federal funds rate refers to the interest rate that banks charge other banks for lending to them excess cash from their reserve balances on an overnight basis. By law, banks must maintain a reserve equal to a certain percentage of their deposits in an account at a Federal Reserve bank. The amount of money a bank must keep in its Fed account is known as a reserve requirement and is based on a percentage of the bank's total deposits. They are required to maintain non-interest-bearing accounts at Federal Reserve banks to ensure that they will have enough money to cover depositors' withdrawals and other obligations. Any money in their reserve that exceeds the required level is available for lending to other banks that might have a shortfall. Note: although the Federal Fund Rates are charged to banks, banks pass them down to clients' personal/auto/student/mortgage loans and credit card interest rates so these interest rates cascade down to society as a whole. With those out of the way we can start discussing the relationship they have with one another as well as the equities market and understand what is happening with the stock markets. RELATIONSHIP BETWEEN INFLATION AND INTEREST RATES In general they have inverse correlation, meaning when one goes up the other goes down. The inverse correlation happens because when interest rates are low people feel encouraged to borrow money, which leads to more spending thus creating more demand of goods and services than supply. When demand is bigger than supply prices will increase to both slow down demand and also (perhaps more importantly) to increase profit margins, which leads to inflation. Because the Fed can manipulate short-term interest rates via the Federal Fund Rates they are able to somewhat control inflation. When interest rates are high the process is inverse to the one described above: people feel discouraged to borrow and spend money; instead they prefer to invest in a fixed income instrument such as high yield savings accounts, CD, or bonds to take advantage of the high yields. It is therefore the job of the Fed to keep inflation and interest rates in balance. Although not everybody agrees, it is understood by economists in general that some inflation is good for economy because it encourages consumers to spend their money and debtors to pay their debt with money that is less valuable than when they borrowed it. Thus some inflation drives economic growth. One of these economists is John Maynard Keynes, who believed that if prices of consumer goods are continuously falling people hold off on their purchases because they think they will get a better deal later on (who doesn't like a good discount?). Another important element that factors into inflation is how much liquidity is injected in the economy (cash, or money supply). More money would translate into more demand and rise in prices. RELATIONSHIP BETWEEN BOND PRICES, BOND YIELDS (or INTEREST RATES), and INFLATION Bond prices and yields also have an inverse correlation: if the bond certificate price (AKA face value , or what the bond certificate is worth) increases the yield decreases and vice-versa. To make things simple and to better illustrate how bond prices and yields are related the example below uses what is known as ZERO-COUPON BOND, where the yield is derived from the relationship between the coupon payout and the bond face value (back in the day the bond certificate--a piece of paper--had small coupons that investors would rip off and present to the borrower to redeem their yields. That terminology is still used to this day although these coupons are not used anymore). Example: if the bond price is $1,000 and the borrower receives $1,100 back at the end of one year, the so-called coupon rate (the yield paid for each bond certificate throughout the lifetime of the bond) is 10% . So the formula to find the coupon rate is: COUPON RATE = ANNUALIZED COUPON VALUE/BOND FACE VALUE; in this case, 100/1000, or 0.1. That formula helps to understand why the bond price and bond yield (coupon rate) have an inverse correlation. It is important to keep in mind that bond yields reflect genereal interest rates. Like interest rates they can move up or down Like other asset classes such as options, a bond certificate holder can sell that certificate back to the market (known as secondary market). If the current bond yield is lower than when the bond holder "bought" their bond it may be interesting for them to consider selling it because it is now more valuable than when they bought it due to the inverse correlation discussed above. So for bond holders, decrease in interest rates is beneficial. Hopefully it is also clear that a rise in inflation that results in higher interest rates affects bond holders negatively. Who would want to sell a bond that is now less valuable than when they bought it? However, higher bond yields are attractive to new bond investors because it gives them more return for their investment overtime. THE IMPORTANCE OF THE 10-YEAR TREASURY NOTES AND ITS YIELD The government sells Treasury Bills/Notes/Bonds via auction. The yield of bonds is determined by investors' bids. The 10-year-yield's importance goes beyond the rate of return for investors; mortgage interest rates are derived from the 10-year yield for instance. But for the purpose of this text, it is important to understand that the market relies on the 10-year to gauge investors's confidence. Here we see another inverse correlation: if confidence is high, the 10-year yield rises and bond prices drop and vice-versa. Any change in the 10-year yield is closely watched by the markets and has enormous impact in other asset classes. PUTTING IT ALL TOGETHER: BOND YIELDS, STIMULUS, EMPLOYMENT NUMBERS, STOCKS, AND THE FED When Treasury bond yields rise bonds become an attractive investment because it is a safer than stocks--specially growth stocks where investors are placing their money on future success as opposed to present profits--since it is backed by the US government and provides fixed returns. While bond investors don't enjoy the big rallies of the stock market they also don't expose their capital to volatility and crashes. With the reopening of the economy in clear sight due to vaccination, and the better than expected job reports investors started fearing higher inflation. That is a simple math: more people making money and out on the streets will boost consumption, which will lead to rise in prices. As explained before, higher inflation causes the Fed to adjustment interest rates, which causes bond prices to fall and yield to rise. Despite what Jerome Powell has said last week--that inflation rise is going to be temporary--investors didn't feel much confidence, which caused the recent sharp rise in the 10-year yield Treasury. With that, bonds became a good alternative to the stock market, causing investors to reallocate some of their capital into bonds. That and the fear caused by falling prices and the media (most of the media fuels panic--one month later everything is green again) resulted in the huge selloff we have seen the past weeks. CONCLUSION Phew, that was a lot. As I wrote on the preface of this text this is an overview of the subject matter so you can always read up on each one of the areas covered here to get more in-depth knowledge. However, I think this provides a good summary of what is going on on the markets right now. Hopefully you will have filled some gaps on your knowledge and will start making more sense of the interrelationship of the many aspects of economy covered here. This is a difficult subject to write about so I apologize if any idea is unclear. I can always clarify anything on the comments. Bottom line: when things are clearer (inflation + interest rates) the markets will most likely stabilize and follow its due course. Growth stocks will continue growing (perhaps at a slower pace) and you will continue making good returns on good companies. I am using this selloff as an opportunity to lower my cost basis and enter positions in stocks that were too expensive before. Sometimes a pullback is all you were looking for even if you lose money in the short term. And hey, one can always buy put options to hedge against their long positions. Good luck and safe trades! ===If you get anything out of this text, please hit the like button and/or follow for updates and new publications.=== ***The ideas shared here are my opinion, not financial advise to place trades. Please do your own research before buying/selling stocks***
FRED:WM2NSEducation
by Safe_Trades
6
The Celcius bubbleDear investors, I'm also a user of the celcius network staking platform. and like most of you people i'm looking into buying some celcius tokens, to get more % on my crypto. But looking at the growth of this project, i'm not really sure this is the moment to buy. Crypto is volatile and people tend to forget this sometimes. I really don't know what's next for the celcius token, A big fall? It will come, but how high will it go? This reminds me a little bit of the crypto.com token, people invested lot's of money into it, to get the best % return and the token felt pretty hard in september. With these project I've always seen a big fall afterwards, will this be different? let's see what time brings. For now, i'm just keeping 10% on my stablecoins.
HITBTC:CELUSD
by TheTradingTraveller
8
Audusd ...a potential to pullback on a downtrend ?How will the cash rate push AUDUSD to? #shadowingthebigboys #trading #forex If you like my analysis and it helped you ,do give me a thumbs ups on tradingview! 🙏 And if you would like to show further support for me, you can gift me some coins on tradingview! 😁 Thank you! Tradingview Disclaimer Disclaimers: The analysis shared through this channel are purely for educational and entertainment purposes only. They are by no means professional advice for individual/s to enter trades for investment or trading purposes. The author/producer of these content shall not and will not be responsible for any form of financial/physical/assets losses incurred from trades executed from the derived conclusion of the individual from these content shared. Thank you, and please do your due diligence before any putting on any trades!
by Shadowing_The_Big_Boys
Analysis: Earn 12% interest APY on stable coins and fiat on NEXOThe following is NOT financial advice: Still feels like mainstream is not aware of the interest savings options available these days. On the Nexo platform they recently raised their interest rate another 2% and you can now earn up to 12% compound interest in stable coins and fiat currencies and a whopping 8% on crypto assets. Paid out daily! The highest interest rates are paid if you let the interest payment be paid out in Nexo tokens and if you stake 10% of your total assets in Nexo tokens as well. Additionally Nexo pays out annually a dividend to their token holders annually. Hence a look at the Nexo token and if it makes sense to maximize your interest rate on Nexo using the Nexo token payout method. The short answer is it depends on your appetite for risk. Generally speaking if you want to maximize the interest earned it makes sense however you have a currency risk so to speak when you want to realize your gains in fiat currency. Looking at the graph which shows the Nexo token in Euro and on the bottom Bitcoin in Euro. One sees that just before the annual Nexo dividend payout the value in Nexo rises, but (of course) crashes just before and after the payout. Also to be considered is that if the crypto market / Bitcoin crashes Nexo is pulled down as well loosing interest. So if you want a more stable interest in e.g. your Euro savings just be happy with the 8% interest you are able to achieve. That's already fantastic in today's negative interest environment. If you follow the market closely and have a more mid-term (over years) horizon you can of course make use of the extra 4%.
N
by CarpeMomentum
2
Inflation hints at potential moves for Gold and USDRising inflation has been the question many analysts, investors, and traders want answers to. Fortunately, these answers may come soon as Federal Reserve Chairman Jerome Powell is set to take the stage (virtually, of course) to address the future of US Monetary Policy post Coronavirus and, hopefully, answer the myriad of questions regarding the Fed’s stance on inflation.​ It is the Federal Reserve’s mandate to have inflation hover around 2%. However, with low inflation rates before the pandemic, Jerome Powell runs the deflation risk due to US citizens not being employed. Analysts predict that the Fed will release a new tool to increase inflation for a more extended period, increasing growth and pricing power. Rick Rieder, BlackRock’s Global Chief Investment Officer of Fixed Income, stated that “the rate markets are anticipating the Fed is going to be dovish and willing to withstand inflation being higher for a more extended period. Currently, the Dollar Index sits just under 93 alongside Gold sitting at $1,943 an ounce. Both are suspectable to change in policies regarding inflation, with both gearing up for a move that would see Gold strengthen and the US Dollar weaken even further if Jerome Powell hints at pumping up inflation. What’s the link between Gold and inflation? You always hear people say, “Gold is a safe haven” However, you may not know why, only that when stocks are selling off, Gold is picking up. What is one of the “haven” attributes that people state as a reason for buying gold? As you can guess by the article – Gold and inflation go hand in hand. That is, as inflation increases, so do, theoretically, the price of Gold. We could go into the nitty-gritty side of things, take out our Econ 101 books, and talk about M1, M2, and M3 money supply, etc. However, what it boils down to is the supply and demand of money versus the supply and demand of Gold. We all know that the Federal Reserve has been printing money as a drastic attempt to curve the Coronavirus’s economic effects on the financial markets. However, this increase in the supply of money risks the devaluation of the US currency. As supply and demand states, an increase in supply, Ceteris Paribus, decrease the price. In this case, an increase in supply implies an increase in spending and demand for goods and services, incentivizing businesses to increase their prices – inflation! If the price of goods and services increases, one US dollar buys less, therefore losing its value. Gold is historically resilient against inflation However, the supply of Gold is relatively set year over year, alleviating the problem money has as there is no central bank increasing/decreasing the supply. Since inflation does not affect Gold’s value, the logic holds that people would instead hold Gold since it will not lose its value through periods of inflation, unlike the US dollar. Inflation also affects many US dollar-denominated bonds. Bondholders get paid a set amount of interest. However, when inflation rises, the real yield the bondholders get paid gets diminished. Real yield is calculated by the nominal interest rate subtracting the inflation rate. In a 0% interest rate environment alongside rising inflation, sees real yields drop into the negatives. Negative real yields push investors away from the US dollar and into other positive or even neutral assets like you guessed it… Gold. So why inflation? With all these consequences regarding inflation – why is Jerome Powell insistent on maintaining their 2% guidance? Inflation is essentially a bi-product of stimulus that the Central bank and the government implement. Essentially, the government and central banks’ goal is to get the economy moving by increasing employment and increasing the number of money households have to spend throughout the economy. An increase in demand for goods and services incentives businesses to increase their prices, hence inflation. However, there is a more critical reason why Jerome Powell wants to try and spur inflation – its that he does not want the opposite, deflation. Deflation is when prices of goods and services decrease. This is a destructive cycle for an economy to enter into as consumers get into the mindset – “Oh, prices are going to get cheaper in the future? I will just wait then.” – However, that is a whole other topic. For now, all eyes on the head of the money printer, the US Dollar, and Gold.
TVC:GOLD
by BlackBull_Markets
1