BANKS HIT HARD
Last week, we saw big drops continue in share prices worldwide. During October, most major stock market indexes have dropped 7 – 10%. The Italian market has fallen by 15% while the Japanese market has fallen by 14%. Argentina’s market fell by 17% in that time frame.
Interestingly, the Brazilian stock market has risen by 10% in October. Maybe the central manipulators forgot to rig that one? Or maybe they are desperate to see a change of government in this weekend’s election? Is BOOM being too cynical? Or maybe that’s because Brazil’s economy has almost Zero economic growth and an unemployment rate of 12%?
But if we look at the broader financial markets landscape over the last 3 weeks, we see industrial metals prices including copper generally stable with some key metals prices actually rising and US government bond markets stable. The US Dollar index has been rising but in relatively small increments, agricultural commodities have been generally resilient and the so-called “crypto-currencies” have been remarkably stable — perhaps even a safe haven?
There was also really good news in the falling oil price. Brent Crude and West Texas Crude prices have fallen by almost 14% over the last 4 weeks.
In complex systems, a change in an individual variable is not as important as the interaction between the multiple variables. When there are many variables (such as in a global economy) and only one changes without much impact on the others, then you must question the significance (and cause) of that change in that one variable.
So what is all the kerfuffle about in the stock markets? And what has caused it? Some say the US-China “trade war” is the cause, others say that high oil prices have caused it or perhaps the Geo-political stand off in the South China Sea, again between China and the US. Brexit has been mentioned. Then there is the mystery of the Khassoggi murder. The US Federal Reserve has been called into question for raising interest rates too quickly. Falling new home sales in America and falling home builder stocks have been implicated. Maybe Trump is the cause? Perhaps the Russians did it? After all, it is fashionable to blame them for everything.
However, BOOM thinks that all of these situations are of little long term consequence to global economic well-being.
The Italian banking sector is the problem. This has been well documented. The government is planning to issue more and more bonds to raise the funds to pay for their increased expenditure programs. They are expecting that the ECB must ultimately buy those bonds or arrange a consortium of buyers or else. Or else what? Or else the Italian bond market will collapse, long term interest rates will consequently surge ever upwards, the Italian banking sector and economy will be devastated and the resultant economic wild-fire will rapidly spread out across Europe threatening Spain, France, the Netherlands and ultimately, Germany and the Scandinavian nations. In that scenario, the Euro should also start to fall precipitously.
Where is the key market evidence for this theory? Let’s look at the German stock market — down 3% last week and down 17.6% since mid January. The French stock market down over 12% since May. The Danish stock market down almost 17% since January. The Swedish stock market down 12% in just the last 4 weeks. The Spanish stock market down 17% since January. The Portuguese market down almost 14% since August.
Let’s look at the EU banking sector …………. hit hard. Deutsche Bank shares down 50% since January. Credit Suisse Bank and UBS Bank (both Swiss) shares down 35% since January. Unicredit Spa shares (Italian) down 40% since May. Barclays Bank shares down 30% since April.
Back in Brussels, the unelected body called the European Commission appears blind to what they are facing. Jeroen Dijsselbloem, the former President of the Eurogroup (a grouping of the Ministers of Finance of the Eurozone), seems to be thinking that the EU can crush Italy just as they crushed Greece. He said a week ago — “If the Italian crisis becomes a major crisis, it will mainly implode into the Italian economy …… as opposed to spreading around Europe,” “Because of the way that the Italian economy and the Italian banks are financed, it’s going to be an implosion rather than an explosion.”
But that could be a major mis-calculation. Italy is the 9th biggest national economy on the planet with a Nominal GDP of almost US$ 2 Trillion. It is not tiny Greece which is the 53rd biggest economy. And the Italians know how to negotiate. The Italian people are pragmatic in the extreme and appear predisposed to abandon the Euro and even the EU. This crisis (and it is already clearly a financial crisis) could render Europe asunder and the whole ship could sink below the waves, never to recover.
If BOOM can see this with such clarity, why can’t the European Commission? They are playing a very dangerous game and don’t seem to understand that they are standing on the deck of a badly wounded ship. Mario Draghi, the head of the European Central Bank is not flinching. He is demanding that the ECB stay independent from the political pressure being brought to bear from his home country of Italy. In doing this, he is adopting the stance of the Captain of the Titanic. “Nothing can sink this vessel”.
They have the weekend to sort this out.
TESLA SHARES SURGE UPWARDS
Tesla shares surged upwards 27.7% during last week’s fall in US stock markets. That is an extraordinary rise during such a negative week. Of course, there was an element of a short squeeze in action with so many traders being short the stock that they had to rapidly reverse their positions, leading to an inevitable price surge. But once those dynamics are settled, we may well see the price peak and start falling again because Tesla no longer appears to be a business, it seems to be more like a religion. The true believers will hold on while the critics will continue to attack. This story has a long way to go yet.
Last week, BOOM saw Volkswagen’s array of up-coming new models. It includes a range of electric passenger vehicles. There are 4 — the ID, the ID BUZZ, the ID Vizzion and the ID CROZZ. They are being designed to function at high speeds, up to 110 miles per hour (170 kilometers per hour) with rapid battery re-charging of 80% over just 30 minutes. The smaller cars could have ranges up to 600 kilometers. They will be mass produced, of course.
VW builds over 11 million vehicles per year globally. Yes, you read that right. 11 MILLION per year. For the mathematically challenged, that is over 30,000 vehicles every day. Think about the logistics. They ship 30,000 cars every day 365 days of the year.
BOOM has visited the Wolfsburg factory in Germany which produces 4,000 vehicles per day. It has TWO power stations to provide the power necessary — one at each end of the factory. They are converting those power stations from hard coal to natural gas at a cost of about $ 500 Million. The factory has 75 km or 46 miles of streets, employs 23,000 people, and has 1,140 robots. The fire department alone has a staff of 76. THAT is a formidable competitor for Tesla where they are currently assembling Model 3 cars in a tent.
VW is not a religion. It is a business.
From Wikipedia — “The Volkswagen Group is the largest automaker in the world as of 2015. As of February 2010, it has 61 production plants and factories in fifteen European countries, along with six countries in the Americas, Asia, and Africa. The Group employs nearly 370,000 people around the world.
Tesla’s market capitalization is now $ 59 Billion. Its annual revenue is $ 13.7 Billion. VW’s market capitalization is $ 76 Billion. Its annual revenue is $ 279 Billion. Go figure. Which one is over valued and which one is undervalued?
PEXA — DIGITAL, ONLINE PROPERTY SETTLEMENTS
Last week, BOOM explained that all financial products and securities may be “tokenized” in the future on secure databases or via blockchain type technologies and made available for investors worldwide. In Australia, this is already happening in regard to property titles. However, it is not a worldwide system (yet).
PEXA is Australia’s online property exchange network. It is being used by 7,581 lawyers, conveyancers and financial institutions. It has already transferred property valued at $ 237 Billion in over 1.74 Million transactions.
It is a paperless process that replaces the old system which relied on exchanging paper documents and bank cheques, taking many days or weeks. The revolution has begun.
Return to the BOOM Main Website – BOOM Finance and Economics at http://boomfinanceandeconomics.com/
EMAIL: gerry [@]
PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 28th October 2018:
1. THAI SETI INDEX — Changed to DOWN Arrow Dominant
2. AUSSIE ALL ORDS INDEX — Changed to DOWN Arrow Dominant
3. FRANCE STOCKS —Changed to DOWN Arrow Dominant
4. GOLD PRICE in USD — Changed to NO Arrow Dominant
THAI SETI INDEX — Changed to DOWN Arrow Dominant
AUSSIE ALL ORDS INDEX — Changed to DOWN Arrow Dominant
FRANCE STOCKS —Changed to DOWN Arrow Dominant
GOLD PRICE in USD — Changed to NO Arrow Dominant
NOTE — RED ARROWS INDICATE BOOM PRICE PULSE DOMINANCE in the present moment (as indicated by the date of the chart and taking into account the 3 year time frame shown). The charts are now arranged in PRICE PULSE RED ARROW DOMINANCE. NOTE: All Charts are WEEKLY Charts over the last 3 YEARS time frame. Arrows indicate PAST price action (not future). No predictions are implied from past action.
Comments refer to past PRICE PULSE (Red Arrow DOMINANCE) over the last 3 years, the week ended 28th October 2018. You can RIGHT CLICK a chart and OPEN in a New Tab. Make your own conclusions, do your own research. BOOM does not offer investment advice.
PLEASE NOTE — Many charts are ETF’s from NY Market (not the base commodity or currency etc). The NY Stock Code is in the Top Left Hand Corner of each chart.
Charts are produced from http://www.stockcharts.com
Return to the BOOM Main Website – BOOM Finance and Economics at http://boomfinanceandeconomics.com/
PRICE PULSE RISING — (RED ARROW UP DOMINANCE)
# BRAZIL STOCK INDEX — UP Arrow Dominant
# PALLADIUM PRICE — UP Arrow Dominant
# ARGENTINA STOCKS — UP Arrow Dominant
# US INFLATION PROTECTED BOND PRICES — UP Arrow Dominant
# US UTILITIES STOCKS — UP Arrow Dominant
# RWR (US Real Estate REIT Fund) — UP Arrow DominanT
# VALE STOCK (Iron Ore) — UP Arrow Dominant
# US BIOTECHNOLOGY INDEX — UP Arrow Dominant
# WEST TEXAS OIL PRICE — UP Arrow Dominant
# US DOW STOCK INDEX — UP Arrow Dominant
# RUSSELL 2000 INDEX — UP Arrow Dominant
# US TRANSPORT INDEX — UP Arrow Dominant
# US INSIDER SENTIMENT (KNOW) — UP Arrow Dominant
# NASDAQ COMP INDEX — UP Arrow Dominant
# US JUNK BOND PRICES — UP Arrow Dominant
# US 3 MTH T BILL YIELD — UP Arrow Dominant
# LIBOR — UP Arrow Dominant
PRICE PULSE FALLING — (RED ARROW DOWN DOMINANCE)
# FRANCE STOCKS — DOWN Arrow Dominant
# AUSSIE ALL ORDS INDEX — DOWN Arrow Dominant
# THAI SETI INDEX — DOWN Arrow Dominant
# GERMAN DAX — DOWN Arrow Dominant
# TAIWAN STOCKS — DOWN Arrow Dominant
# FVL — VALUE LINE — DOWN Arrow Dominant
# US KBW BANK INDEX — DOWN Arrow Dominant
# US LONG BOND PRICE (TLT) — DOWN Arrow Dominant
# YEN (AGAINST $US) — DOWN Arrow Dominant
# DENMARK STOCKS — DOWN Arrow Dominant
# COAL ETF (KOL) — DOWN Arrow Dominant
# TED SPREAD — DOWN Arrow Dominant
# COPPER PRICE — DOWN Arrow Dominant
# INDUSTRIAL METALS ETF (DBB) — DOWN Arrow Dominant
# YUAN (AGAINST USD) ETF — DOWN Arrow Dominant
# HANG SENG — DOWN Arrow Dominant
# SOUTH KOREA STOCKS — DOWN Arrow Dominant
# SINGAPORE STOCKS — DOWN Arrow Dominant
# AUSSIE DOLLAR AGAINST US DOLLAR — DOWN Arrow Dominant
# CANADIAN DOLLAR AGAINST USD — DOWN Arrow Dominant
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# NOMURA HOLDINGS — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# PLATINUM PRICE — DOWN Arrow Dominant
# SHANGHAI STOCKS — DOWN Arrow Dominant
# BITCOIN INDEX $NYXBT — DOWN Arrow Dominant
# DEUTSCHE BANK SHARES — DOWN Arrow Dominant
# FOOD INPUT PRICES (DBA) — DOWN Arrow Dominant
# EURODOLLAR INDEX ($XED) — DOWN Arrow Dominant
PRICE PULSE UNCERTAIN NON-DOMINANCE OF RED ARROW –
# GOLD PRICE in USD —NO Arrow Dominant
# GOLD PRICE (in Aus Dollars) — NO Arrow Dominant
# TRIM TABS US FLOAT (TTAC) — NO Arrow Dominant
# US HIGH GRADE CORP BONDS (LQD) — NO Arrow Dominant
# AGGREGATE US BOND PRICES (BND) — NO Arrow Dominant
# COMMODITIES INDEX (USCI) — NO Arrow Dominant
# INDIAN STOCKS — NO Arrow Dominant
# SWISS STOCKS — NO Arrow Dominant
# SWISS FRANC (AGAINST $US) — NO Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — NO Arrow Dominant
# NATURAL GAS (SPOT PRICE) — NO Arrow Dominant
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