New Article
Fundamental Analysis on the Markets
Andre Schneider Jiménez
June 2019
SECTIONS
INTRO
I
STOCKS
II
BONDS
III
YIELDS & EURODOLLARS
IV
GOLD & SILVER
V
CRYPTOCURRENCY
VI
ENERGY & OIL
VII
AGRICULTURE
VIII
GOVERNMENT CRYPTOCURRENCY
IX
CENTRAL BANKS
SWITZERLAND &BOJ
INTRO
this Is a small article I write in June of 2019 with the finality to be read in the future and realize that much of the analysis I will cover will become true or maybe a fraction of it. I believe that this information if used properly can create profit for the user, but its not intended to be financial advice, just my personal opinion from the things I’ve been reading online.
There is a saying that I’ve read online that says “More Millionaires were created in the Great depression than in other time in history”, although it may not be true, the reason why I emphasize on this text is because the economy is a zero sum game almost always, one mans debt is the other mans liability, so in a world in which an asset goes up, another must go down, money flows from one part to another.
Stocks usually go up like stairs and fall like an elevator, the reason why timing falls is so lucrative is because time has such a big effect on the value of assets, so with the correct timing a lot can be made.
In order to prove that this document was made in June, I attach a XRP transaction made a few days ago, to validate the exact timestamp. I sent 1 XRP from one account to another.
I start this article stating that on the 16th of January 2018 I wrote my first article in which I spoke about the overvaluation of the stock market In relationship to past years using multiples and also because future growth seemed difficult due to contracting money supply.
https://steemit.com/crisis/@dreder/poppin-bubbles-2018-edition
It was called “Poppin Bubbles”, although the downfall did not happen in 2018 we did have 2 corrections which didn’t go down enough, to where fair value would be according to my mind.
I have to write this article in June due to the fact that whenever July comes, I believe the fed will cut rates and we will start to see a bull market in gold and silver and cryptocurrencies, why? Because of the amount of debt in the world.
Stocks
Stocks for the most part of the recovery (2008-Now) have done well, the US markets attracting capital from around the world because of a strong perception of the economy and also because of currency depreciation around the world, like the Turkish Lira or Argentine Peso.
*Chart & Credits from/to NorthMan Trader
In this chart we can see MACD turning bearish, although we had a false signal in 2015. It can now be confirmed because unemployment is too low now, and also bond yields are too low in relation to the Federal Funds rate. *Chart from NorthManTrader.com
Now, another thing that must be understood in order to understand the high prices of stock nowdays is because of whats called “Corporate Buybacks”.
A company will buy their own stock in order to pay less dividends or to make their EPS higher. It may work at first, but In the long term I’m not sure of its full effects.
Summarizing the reason why stocks are high now is because there is nowhere else to invest and get a respectable return on investment, so money from around the world is seeking a yield. Since many currencies are depreciating against the Dollar, like the Turkish lira, Argentine Peso , money flows from damaged countries into the US.
Although my own theory and Idea is that money goes into the stock market directly by the Fed by the use of other countries as official buyers. And also the playing of investors feelings by playing them with rate cuts.
*Chart from Crescat Capital.
Also, at the end of an economic cycle, commodities tend to get cheaper because of a lower demand in the near future and equities are very high. So the above chart shows us that commodities are undervalued relative to the S&P, this doesn’t mean they will rally a lot, they may go down equally, but the S&P in a bigger move.
Bonds
The bond market is the Interesting subject in my article.
So, bonds are basically an agreement of a loan from one to another. For every debt there is an owner of that asset, so in the whole economy, debt is getting bigger by the day and in the future it will only be paid in 2 ways, default or hyperinflation.
So, Debt in all sectors has been expanding always meaning there is no way for the system to deleverage in a way that wont hurt the economy.
The only time the debt went down was in 2008 when the Fed purchased 4.5 Trillion dollars of assets from the major banks in order for the banks to not do a bail-in and take depositors capital.
In order to “grow”, debt needs to expand perpetually in this system. Later Ill explain how to profit.
Long term bonds usually pay more than short term bonds.
So Ive been taking Screenshots of the yields of American Bonds.
May 15th 2019
June 2nd 2019
June 7th
July 15th 2019
What is important to notice is that as time went by, yields went down in general, money flowed into bonds making the yields lower, only the 30 year pays more than the Federal Funds rate, so banks aren’t really interested in buying any bonds, since just letting the money set in their own system is more profitable, they get paid on the Interest on Excess Reserve rate.
You can also see that the 3 month pays more than the 2yr, actually .32% more, so the market is only discounting a slowdown of .32% in the next 21 months starting from in 3 months.
Since these bonds trade In tandem I compare them to the FF Rate, which I will do next.
The Graph Above signals the Difference between the 5 year and 3 year, once the 3 year pays more than the 5 year the graph turns negative, 3 prior occasions were 1998, 2000 and 2008.
This graph is from may but is still relevant, Its negative now.
Expectations aren’t good in the long term.
To Validate, I add a comparison. S&P is orange and the spread between the 3month and 10year is in blue.
When the orange line ascends we’re near problems in the market because the credit markets are signaling no growth or slower growth in the future.
Actually, today 15th of July 2019, the 3MY is higher by .051% than the 10YR.
Red lines are the exact moment in the past when the inversion took place, also in 2000 and 2008.
In the form of bonds, the national debt is sold to investors or Countries looking for a yield, same story with Student Debt and Auto loans, every liability is someone else’s asset.
both markets, student and auto surpass a Trillion each, so its now understandable why the fed never raised rates above 2.4%, the economy would of never sustained any growth above that.
Just with 22.5 Trillion in national debt, interest payment is 550Billion USD per year, not including the 1-1.5 trillion it goes up on average a year.
Canada Yield Curve
*Graph from Crescat Capital.
Some funds analyze the amount of inversions in the curve of the total spread available, the Canadian, for example is inverted now and has a large problem because when the crash does hit, the CAD will loose value because it’s a oil producing nation and also because the real estate market in Canada is very leveraged and dependent on low rates.
Yields and Eurodollars.
What the yield curve symbolizes is that the economy is waiting for lower growth in the future. They also symbolize a credit freeze in a fashion in which its just not as attractive to lend money because banks usually get their funding from short term rates and lend at a long term.
I like the Eurodollar subject because what it is is a way to protect against moves in the Federal Funds rates.
You can go long in the Eurodollar futures if you believe a rate cut is coming.
I believe the Eurodollar futures could surpass 100 for the first time in history and that’s why Its in this article, because once the Fed target rate is negative, the Eurodollar will be higher than what it is now.
Just by looking at the graph you can see that the low points are in crisis zones, so we are very near the start of a crisis and just by technical analysis I can assume that going long in Eurodollar Futures is a huge winning trade because of the Leverage involved.
Going Back to yields,
There is now approximately 13 trillion dollars in negative yield bonds.
In Germany you’d have to purchase a 17 year long Bund just to have a 0% yield bond. Shorter term bonds are negative in order to incentivize the economy.
Here is the Negative Bond Yield Matrix. United States is a Great to invest in bonds, for now… (Yields do get compensated by FX movements)
Inversions for more than 90 Days.
Source: Crescat Capital LLC.
Gold & Silver
I’m very bullish on both, more bullish on Silver. It’s an asset that hasn’t broken its 1980’s high, while all else have. I’m bullish because Demand is always high and growing, it’s viewed as money. And once investors realize America and the world is heading into Negative rates, assets to protect from inflation will be seen as a good investment.
The reason why they’d go up un these rate cuts is because the dollar would lose value internationally, mostly against Bitcoin, Gold, Silver and Oil and some commodities.
Another reason why Im bullish is Because the Silver Market is manipulated to the downside, year after year banks pay millions in fines to settle.
Turns out Deutsche Bank is running into huge trouble and in my opinion declare bankruptcy this year.
The DBK bankruptcy will be big because they are the largest bank by Deravatives exposure, near 40 Trillion Dollars. So other banks will be in trouble once DBK is broke.
I’ve analyzed the way out and there are 3 solutions to the problem, DBK brings down the financial system by affecting all large banks in the world, DBK is nationalized and merged with CommerzBank with government funds or DBK is rescued by the German Government with public money or bail-ins.
All the above are benefitial for Gold and Silver due to the fact that they all create problems in the Finacial system. Not to mention the fact that Also JP Morgan has paid millions in Fines for Silver Manipulation.
Total amount of investable silver is near 20 Billion Dollars, while the Silver market trades 5 trillion dollars a year, the market is very leveraged. Just as a comparison, 10% of the Bitcoin Market Cap could purchase the complete amount of silver held in the New York Comex Vaults.
Not to mention JPMorgan and other banks are the custodian for the Silver ETF SLV which holds approximately 300 Million ounces. At the same time JPMorgan is the Custodian for 150 Million ounces of Silver which they hold for the beneficial owner, who is unknown.
*Historical opinion.
US went off the gold standard to print as many dollars and create a lot of “weath” and pay for all expenses of the military while at the same time switching the payment for oil internationally into Dollars, so an artificial demand for dollars would always exist as long as oil is needed.
The constitution still says that money can only be gold and silver.
Cryptocurrency
Very Bullish, mostly on Bitcoin, Ripple and Stellar.
Money creation has no limit nowdays and as explaned earlier when the economy crashes, rates are going negative and growth will be non existent in many areas of the economy so speculation/investment in cryptocurrency will seem like a good idea.
Now 1 BTC costs nearly 10,000 USD while in 5 years I believe 1 BTC will at least be 200,000 USD due negative rates and the amount of money created.
Bitcoin is deflationary in an inflationary financial world. That’s why it constantly goes up.
XRP is used by some banks to send money instantly.
Stellar is the same as XRP with the difference that it tries to seek ordinary people to use it and send money with it.
Here I attach something called Exter’s Pyramid, at the end of the day there is so much money In the world and not much is needs to make the Cryptocurrency space to double.
The total value of all Crypto is worth just 251 Billion today 16th of July 2019.
Unfunded Liabilities in the US are more than 200 Trillion at the moment.
Another important thing:
I belive the US knew that at some point other countries would stark stacking gold because of so much money printing that we now see, so the US government created bitcoin in the 1990’s based on the NSA’s SHA 256 Algorithm.
Why? Because the bitcoin creator has 1 million coins, and imagine when bitcoin is the world reserve currency? America looses the dollar reserve status but pumps bitcoin so high that it doesn’t even matter.
It could be that the 2017 bitcoin mania was fueled by the Fed in order to create a trickle effect in the American economy. Just like Quantitative Easing or Helicopter money. Spread out the money and how much better could it be if its all anonymous.
As said earlier, in such a small market, the profits are at least 10X if you wait long enough.
This is a linear regression that shows that we should be nearing 40,000 USD per bitcoin this year and in the future even more, until 330,000 in 2024 per BTC.
Energy and Oil
The world is powered by mostly oil and coal.
In the 60, and 70 less energy had to be spent extracting the energy, nowdays, the amount of debt that companies have is too high to maintain and when the recession hits oil will go lower I believe approximately 30 USD to then go to 100 USD because of money printing.
Oil producing companies are fueled by the bond selling assuming that they will become profitable in the future, but because prices will go down for a short amount of time I Believe many companies will be in trouble.
That’s why I Believe purchasing CDS’s on Shale oil companies is a good idea in preparation for the recession.
Bearish on the Companies, Bullish on Oil because Oil is priced in dollars and the dollar will lose value, making the oil price go up after the recession.
Oil companies and the pension funds investing in them are in danger due to the fact that in this circular economy, the oil industry is only held by longer term bonds and refinancing at lower interest while pension funds are buying those bonds which at some point be losing value.
A very good site to know about the energy problem is SRSRocco.com, its an honest site with good information.
Agriculture.
We are entering the Grand Solar Minimum, which means colder winters and in summer season more humidity and more presence of fungus which will make lots of areas which are now food producing turn into not so good lands.
The way to profit is to look for weak companies that produce food in areas far away from the equator and short their bonds with CDS’s.
That way when their bonds get degraded we profit. YoY I’ve seen the evidence that many crop producing areas are starting to fail and in the future if the weather keeps getting colder the results will be amplified.
Government Cryptocurrency.
I believe in the future money will be turned even more digital. Now there are only 1.4 Trillion in printed cash while total money supply is near 14.7 Trillion USD. Thanks to Fractional Reserve Lending and credit Cards. So the money really doesn’t exist, so as cryptocurrencies. Its just confidence that tomorrow they will purchase something.
Swiss Central Bank and Bank of Japan.
Many don’t know this but both countries mentioned above have Negative rates, (you invest 100,000 USD , with a neg. rate of .5% you get back 99,500 USD in a year).
This was done in both countries to help the real estate market and keep money in the economy because most of the world is so in debt that its become unpayable.
So with 247 trillion in world debt and a crisis I expect interest rates to go lower in developed economies while in some emerging markets they may se higher rates because they’ll try to make their currency more attractive.
The point is, the Swiss Central Bank and Bank of Japan (Both private) purchase equitites worldwide to keep stock prices high. For example, the Swiss do it in order to devalue the frank while purchasing American stocks while in Japan the BoJ does it to keep the market high due to the fact that their stock market high was back in 1989. Ever since Japan went into negative rates it hasn’t grown in real rates, only nominally. I say they haven’t grown in real rates because growth has been fueled just by debt and then made Japan the country with the most debt per Citizen.
These are Japanese Interest rates, today July 19, 19, it is -0.1%.
Swiss rates are even worse. -0.75%.
For any ordinary person It just doesn’t make sense to purchase a bond now, only if you are exiting the market and looking for a safe place to put your money, which will even make rates go even more negative when the stock market starts falling.
The Swiss National bank owns a stake of about 90 Billion Dollars in the US stock market.
While Japan, being a larger economy. Its central bank holds an approximate of 259 Billion USD. Or near 3% of the stock market according to Bloomberg.
https://www.bloomberg.com/news/articles/2019-04-25/boj-considers-etf-lending-program-leaving-market-perplexed
This information is an eye opener into the money creation which will ocurr in the near future and I write the ideas on how to profit onto whats coming because it wont take too much before we se the consecuenses.
I actually believe that we will se the start of everything with this bank that will go bankrupt (Deutsche Bank) before new year in the Hebrew Calendar which is September 30th of 2019.
The Hebrew calendar is important to me in finance because the 2 largest drops occurred on the same day (last day of the year, “Elul 29”) in the years 2001 and 2008. A Difference of 7 years at the exact date.
Reminder
S&P volume has been going down recently. Preceding another fall.
Image from Crescat LLC
Rate Cuts are not positive for the economy. They are cutting for a reason.
Image from Crescat LLC.
The market is pricing a cut for July 31 and that’s why I have to publish this today July 19th.
At the end of the day the recession will just be a small bump in the road, I do believe a great economy comes after this recession. A more digital economy backed by the power of Cryptocurrencies.
Any Ideas to whoever reads my article I can be contacted to the email:
[email protected]
The End
Andre Schneider Jiménez
19th Of July 2019