It’s time to choose sides

We just finished a crazy week. A week that will have been marked by the fact that the announced red wave of the Republicans has turned into a wave and that no one cares. Also marked by the disaster of FTX – the third largest cryptocurrency exchange in the world – a disaster that occurred at lightning speed and which at the same time weakened the entire cryptographic system. And then, to finish off, we had the inflation numbers that proved to us that the Fed was all right and that Jerome Powell was our guide and that it was time to erect statues to him. Now, it remains to be seen which of the Bulls or Bears will win the final fight.

The audio of November 14, 2022


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I have rarely seen so much opposition

After this crazy week, it’s time to put things on the table and imagine what will happen next. When scouring the weekend media, there seem to be two options:

– Option 1) We are in a new Bull Market and nothing else can happen to us because we are already looking far beyond a possible recession or a possible slowdown. The visionary investors that we are, investors who are no longer trading, but investing in the long term, already see the economic reconstruction that we will experience when everything is resolved – it remains only to determine what still needs to be liquidated. , from Friday’s CPI. it seemed to have already cured almost every disease on the planet and put an end to all global geopolitical tensions.

– Option 1) is therefore the option we live in in a Care Bears world and Thursday’s numbers are a miracle almost as miraculous as the one that split the Red Sea in two to go to COP27.

– And then there’s Option 2) which kindly explains to us that the rebound on Thursday and Friday is just pure delusion and that the CPI numbers are just a data point in Fed thinking and that those who think Powell and his friends will flip the jacket game in December, poke their finger in the eye up to the elbow and even more. The St. Louis Fed chairman also stated this weekend that the “relatively good CPI” published last week is just more information and that, in his opinion, rates should rise further and remain high. its monetary policy. Or even a vision for the future of the economy.

– Option 2) therefore clearly implies that we are just jumping into a bear market, that we cannot have a true start to a bull market without a massive capitulation of the system – something we have not yet seen – and which we will never see find. the strength to break the downtrend resistance we are in based on Thursday’s number alone. And that, to finish, it seems obvious that we are going to fall again to test the lows of June.

Bull or Bear, our hearts sway

So, of course, supporters of option 2) also don’t rule out that we have a Christmas Rally, but the punishment will be severe. On this Monday morning, we are therefore in a very clear situation: it is time to choose a side. The challenge will be tricky as, on the one hand, you will have to dare to go “long” after a rebound of almost 10% in 48 hours, and on the other hand, you will also have to dare to do nothing while waiting for it to pass down again, though scary about the fact that it may never go down again and that in 2 years, when the S&P500 passes the 10,000 point mark, we will be sitting on the side of the road thinking:

“Well, do I buy it or don’t I buy it??? »

In any case, the markets enter the week with a mountain of arguments from both sides and it will not be easy to make a choice in the current environment, especially with everything that could still “potentially” fall on us. The big economic numbers that can move us are behind us and we will have to wait until the beginning of December to start heating up the rest, but so much to tell you that in the coming days, there will be so many opinions and opinions that will burst in the media, that it will be necessary to think about taking two days off a week to have time to read everything and integrate everything correctly. Even this weekend, I won’t even tell you everything that was said and told in the media.

Between bull market emperors like Tom Lee, who think we’re going to take 25% off the S&P500 before Christmas, to experts on just about everything like Jeremy Siegel, who are always there to opine on anything – as far as Siegel is concerned, this Last week he came to reassure people to tell them that the FTX collapse was rubbish compared to Lehman in its time and there’s Bank of America who thinks the conditions for the Bull Market’s revival have not yet been met. And UBS who thinks we’re going to fuck up and the 3,600 is coming. And I can swear to you that we’re entitled to an avalanche of punching speeches over the next 2 weeks. But we must always remember that almost no one thought that we would be here today and that we would have lived a year like this 8 months ago, so we can reasonably ask ourselves why today we would know better than 8 months ago…

in asia

This morning in Asia we expect the meeting between Xi Jinping and the bedridden White House that has just confused Cambodia and Colombia. Well, in his defense, it’s true that it starts with the same letter and, better yet, ends with the same letter. After that, it’s 30 hours by plane from each other, one in Asia and the other in South America, but that’s just a detail. In short, the two leaders will meet today and it promises to be funny when Biden mistakes the Chinese leader for Kim Jong Un. At the moment, Asian clues are confusing. Japan is down 0.8%, China is up 0.8% and Hong Kong is still in the short coverage phase and is up nearly 2.8%.

In China, we always talk about “détente” in terms of COVID, and then suddenly oil goes up because we tell ourselves that – inevitably – if the Chinese open the floodgates, oil consumption will go up like Bitcoin when we thought it would go down. 100,000 by Christmas 2021. Oil is currently around $90 in WTI and that will certainly help us have a good holiday season with a liter of gasoline at $2.50. On Bitcoin, the latter is digesting the FTX collapse and dealing with all the rumors circulating in the market about whether Binance’s reserves, made up of more than 40% of its own tokens, will be enough in the event of a heavy blow. Bitcoin is worth $16,000 or more and I remain convinced that it must first drop to $12,500 before anything else. Ether is at $1,187 and gold is worth $1,765.

news of the day

As far as today’s news is concerned, we are inundated with noise, rumors and explanations about what happened at FTX and how the “other” exchanges are doing their best to explain to their customers that everything is fine and that ‘they are solid and nothing can happen to them and THEM, they didn’t use customer funds to lend money to tellers they have to trade. We are also unraveling the ball of yarn to try to understand what SBF did and how big of a fake it is. Not to mention that the list of his victims grows every day and the US sports stars are on it until the end. Brady and Curry will have paid off their passing debt.

unnecessary advertising

Other than that, one of Musk’s companies, SpaceX, has just ordered the biggest advertising package available on Twitter to promote its satellite internet system: Starlink. So if ever, as I live at the bottom of the world and the networks are rotten where I am, I subscribed to Starlink 18 months ago. It worked great until early 2022 – then they cut prices in half, increased network distribution without increasing the number of satellites AND on top of that they redirected service to Ukraine – and since then, it’s been a nameless piece of crap that has approx. the speed of ADSL and sometimes posting something on the network, it is faster to send a letter to the post office than to use Starlink. So whether to advertise on Twitter or not is crap and as long as there are not enough satellites and there is war in Ukraine, it will continue to be crap. And some really expensive crap too.

Numbers and Elections

On the electoral side, it should be noted that the Democrats have therefore regained the Senate and that they still have the hope of winning Congress as well, as everything is not yet counted. Trump is mad with rage and the GOP has been in doubt for a week. This week we will also have releases from the retail sector, which promises to put inflation back on the table, then we will also have the quarterly releases from NVIDIA, which can confirm or invalidate the renaissance of the semiconductor sector.

But today there will also be PPI in Switzerland, industrial production in Europe, inflation expectations seen by the consumer – so I can’t even imagine the survey of two balls with 500 randomly drawn Americans – and then there will also be the head of the SNB who will speak. It’ll keep us warm for the rest of the week. For now, futures are down 0.35%, but that’s okay, inflation is under control and transitory.

For the rest, and as far as I’m concerned, I wish you a great Monday and a great week. I’ll meet you tomorrow, at the same place and time, as usual.

Thomas Veillet
invest.ch

“Always keep in mind that your own resolve to succeed is more important than anything else. -Abraham Lincoln

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