News

At the beginning of the trading session on Wednesday, oil quotations rose sharply. Maximum daily candlestick touched the 200-day moving average. Then speculators got scared and allowed a small pullback by the end of the trading session. Let’s find out what’s going on with black gold.

OIL.WTI

Commercial oil reserves in the U.S. fell by 7.3 million barrels last week, according to the U.S. Department of Energy weekly report. Experts interviewed by Bloomberg expected oil reserves to decline by only 3.4 mn barrels.
On the other hand, the US stock market showed another confident day of growth, also pushing the demand for black gold. Speculators waited for the optimal point to break through the range of the last 2 months and break the bear’s footprint.
Hopes for a faster recovery of the world economy make some experts talk about the price of $50 per barrel by this autumn. We believe that such expectations are still unfounded. On the one hand, the holiday season will end in autumn, which is currently increasing the demand for fuel. On the other hand, a second, even more powerful wave of coronavirus may come in autumn.

Gold

Breaking through the $2,000 per troy ounce on Tuesday, the gold doesn’t think to stop. On Wednesday, the yellow metal successfully withdrew its stops at the level of 2050$. It is logical to assume that the level of $2100 will be taken in the coming days. Moreover, it will not be the new buyers of gold who will be to blame, but rather the sellers of derivatives, who panically liquidate their positions.

Indices

The ISM Manufacturing Index for July came out much better than expected. This is exactly what we wrote about last week. The U.S. economy is falling very fast, but it is also starting to grow rapidly. Positive news pushed the S&P 500 index by another 1%. Although August is considered to be not a good month for buying stocks, this particular month is likely to be an exception. And we will see another historic high on the S&P 500.

What’s waiting for us today?

08:00 Bank of England decision on interest rate
08:00 Minutes of the meeting of the Bank of England at the interest rate
13:30 Speech by the Governor of the Bank of England, E. Bailey.

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

On Tuesday, yellow metal reached another target, $2,000 per troy ounce. Futures got to this level a few days earlier. But Tuesday can be considered the official day when this mark was reached in the forex market. What’s next?

Gold

It gets more interesting from here on out. In the two largest countries of the world, China and India, there is talk of banning or restricting possession of physical gold. In India, for example, gold is passed on from mother to daughter through the female line. It is considered an insurance policy against loss of the breadwinner (man). In this country, the possibility of declaring gold by individuals is being considered. And the payment of 30% tax.
It’s not enough that a third of all gold will be taken under this tax. So in the future, if the state wants to come for gold metal, it will know exactly who to go to.
Now let’s imagine what will happen in developing countries and countries of the 3rd world, when the price of yellow metal will rise to $ 3000. There will be even more people willing to take it away from them. After all, the price itself, in this case, does not talk about anything. In the markets “paper gold”, for example ETF is quoted. And if ETF owners or investors want to exchange paper gold for real gold, the market will collapse, with unpredictable consequences.

S&P 500

The major U.S. stock index is getting closer to its peak in February. It’s about 3% left. Of course the situation is absurd. The world economy is in ruins. And the US economy, even with these ruins, looks even worse.
But pumping stock markets with empty money continues to work. It is crucial for Donald Trump to keep the American stock market at high levels by the time of the election. The largest banks and investors are mostly supporters of the Republicans. And they don’t see any point in selling out stocks right now.
The most interesting thing will start as soon as the election results are summed up. If a Democrat candidate wins, everyone is waiting for a strong fall in the S&P 500 index. And in the case of Donald Trump’s re-election, markets may fall down amid profit taking.

What’s waiting for us today?

09:55 Composite index of business activity in Germany for July
10:30 UK Service Business Index July
11:00 EU retail sales for June
16:00 ISM Business Activity Index for the US Services Sector for July

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

04.08.2020 – Special Report. New week, new warning: The stock market is overvalued. Specifically, the performance of high-tech stocks is a cause for concern. The bulls are shrugging their shoulders in the face of constant reminders from crash prophets – after all, even a broken clock shows the right time twice a day. In fact, we may be living in a logical world right now – in times of worthless cash, or dollar debasement, it all has to be like this.

Stock market decouples itself from the real world

Last week confirmed the now familiar dichotomy between the stock market and the real world: the indices are holding near their all-time highs. And the US real economy collapsed in the second quarter by a historic 33 percent on an annualized basis. At the same time, the warnings of rent losses are becoming louder and louder. According to Bloomberg, 33 percent of tenants were unable to pay in the first week of July. And now worse is looming on the horizon: this means that 12 million tenants in the USA could be on the street in the next four months.

Shooting Star Apple

The stock market doesn’t care about any of this. Sven Henrich of NorthmanTrader.com looked back last Friday at market performance at the end of July. And he focused on some worrying alarm signals: Apple alone gained 170 billion dollars in market cap last Friday. The ratio in the valuation of tech stocks to GDP is now higher than in the tech bubble of 2000, and in fact Apple’s rapid rise was more than Oracle’s market cap and greater than Hungary’s GDP. Friday’s gain alone would have been the 33rd largest share in the S&P 500.

17 factors point to an overvaluation

Also on Friday last week, Bank of America’s Savita Subramanian wrote that the S&P 500’s P/E estimate had risen from 21.5 in June to 21.8 in July. The current multiple is two standard deviations above the average of 15.4 measured since 1986 – we have now reached the highest value since the tech bubble. According to Bank of America, stocks are now trading above average in 17 out of 20 categories. Particularly worrying: According to this study, the price/book value ratio of growth versus value stocks is moving in the stratosphere. Due to the permanent intervention of the Federal Reserve, growth stocks are particularly sought after outside of any valuation.

This must be so

Investor Louis-Vincent Gave gave a stunning analysis of the situation on Evergreen Gavekal’s blog: First, he had explained the record-breaking recovery on the stock market since the Corona low with the hope of an economic rebound. Then he had considered the possibility that investors had lost their minds. Now the turnaround: It is possible that investors have no choice but to go in. Because the dollar is going through such a rapid debasement – in other words, such a devaluation – that it would be pure madness to sit on cash for a while.
And so, in the second quarter, the global equity markets delivered their best performance in two decades. In fact, the US M2 money supply had risen by around 25 percent year-on-year. The assumption that cash will soon become worthless is not a misconception. The printing press is running faster than ever before in the history of the US or any other G7 economy.

Four goals for the bulls

According to Gave, the raging bull has mainly fled into four asset classes: 1 – Big Tech. 2- Green investments. 3 – Precious metals. 4 – Chinese equities. The analyst dismissed the flight into alternative energies as a political misallocation, known as the Cantillon effect: Those who sit close to the source of money see the prices of their goods rise rapidly – no matter what they sell. For example, the investor Richard Cantillon pointed out that the prices of everything the Spanish court bought in the 16th and 17th centuries rose rapidly with the massive silver mining in Latin America. And now challenger Joe Biden has promised 2 trillion dollars for a Green New Deal.
The performance of asset class number 4 has been fueled by Beijing’s decision to decouple from the dollar as a reserve currency – another reason why more greenbacks are now roaming the globe. In addition, there is the monetary policy of the central banks, from which precious metals have also benefited – especially mining stocks.

Competitive Advantage USA

And the rise of FAAMG – the aforementioned asset class 1: Facebook, Amazon, Apple, Microsoft and Google – is also due to the fact that the underlying currency is becoming less and less valuable. Indeed, in a world with an abundance of dollars, only those industries in which the US has a competitive advantage would perform well. And that is the world we are experiencing today.

From the summer dip to the new top

Michael Hartnett, Chief Investment Officer of Bank of America, also addressed the issue of dollar debasement. And gave two forecasts in his weekly flow show: First, a summer dip in the S&P 500 with a possible low of 3050 points.

Then the stock market is likely to move to a new top somewhere between 3,330 and 3,600 points between August and January – probably due to the introduction of a corona vaccination, which will lead to a capitulation of the bears; before the bull market is stopped with higher interest rates.
As always, we keep an eye on these exciting topics for you – the Bernstein Bank wishes successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

03.08.2020 – Special Report. Hard times for the big high-tech companies in Silicon Valley: Interfering in the election campaign in favor of the Democrats is likely to have consequences. In addition to this, there is the shameless building of monopolies, which destroy jobs and small companies. And since Facebook, Apple, Amazon and Google, and to a small extent Twitter, are pillars of the stock market, investors should follow the issue closely. There may soon be short opportunities here.

Monopolies and censorship

What happened last week in front of the House Judiciary Antitrust Subcommittee was a monstrous spectacle. Four company bosses had to answer questions – Tim Cook from Apple, Mark Zuckerberg from Facebook, Sundar Pichai from Google and Jeff Bezos from Amazon.
Val Demings, Democratic politician on Joe Biden’s short list for vice president, asked Zuckerberg why he was cutting off access to tools from competitors like Pinterest, but not from non-competitors like Netflix.
Ken Buck, a Republican from Colorado, reported that the founder of a company called PopSockets had to pay $2 million to Amazon – only then did the online retailer stop selling fake products on the platform. Amazon gets away with such scams because Jeff Bezos is the owner of the “Washington Post” – which is pro-democracy. The Democrats hold the majority in the House of Representatives; under Barack Obama Amazon had nothing to fear. Now, however, things could get out of hand.

Businesses and newspapers die

“The Guardian” wrote: “Congress’s historic tech hearing suggests antitrust crackdown could come soon”. The Guardian said that America lost around 100,000 small companies between 2000 and 2015, many of which went down on their knees because of Amazon – while Amazon avoided taxes, the company undercut prices and increased fees. In addition, thousands of media outlets have been closed because the advertising revenues go to Google or Facebook; two thirds of the counties in the USA no longer have their own newspaper.

Possible blacklisting of the conservatives at Google

With negative consequences for the diversity of opinion. After the hearing, Republican Senator Tim Cotton demanded clarification from Google about the blacklisting of conservative media. In a letter to CEO Google Sundar Pichai, he demanded an answer about a change in algorithms in May. Pichai had earlier testified under oath that it was not possible to manipulate the search. But Alex Marlow, editor-in-chief of the right-wing website Breitbart News, told Fox News that search engine traffic had dropped by 99 percent since May. Specifically, Breitbart accuses Google of ensuring that its own website is hardly ever accessed via Google. While most news sites receive 30 to 50 percent of their online traffic through search, Breitbart’s is only 9 percent. Other conservative websites are also blocked.

Big Tech no more

Whether Big Tech will be crushed depends above all on the election in November – the Republicans are likely to make short work of it if they march through. This could mean an antitrust smashing for the stock market: If the powerhouses Google – i.e. Alphabet – Facebook, Apple and Amazon are decapitated, then these corporations should initially be turned into a few smaller units. Whether the many small techs that will then emerge will operate as successfully as the gigantic units currently in existence is a matter of doubt – they will no longer be able to crush the competition with their market power. Perhaps not all of them will be included in the S&P 500 due to lack of profits, perhaps some will be swallowed up by big competitors. Either way, managers of investment funds will first have to reorient themselves in this case. Therefore, the Nasdaq is likely to be turbulent. We will keep an eye on the matter for you!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

There’s a well known trading pattern. If the price goes one way (rising) during the month, the closing of the monthly candle will be at the maximum of this candle. This is exactly what speculators were waiting for, continuing to sell the US dollar against all currencies. But this time it did not work!

EUR/USD

July 31, the last day of the month, was the day of profit taking. The dollar rose sharply not only against EURO, but against all currencies as well. Including even shelter currencies, such as the Japanese yen and the Swiss franc.
At the same time, the data on GDP of France became an additional negative factor specifically for the EUR. The GDP of France in the second quarter fell by about 2.4 times less than that of the USA. However, this decline was perceived as “normal” in America. And in France, it was a disaster.
We think that the US economy is much more mobile than in the EU countries. American companies can very quickly reduce the volume of production and services, dismissing workers without consequences. In Europe, in terms of mobility, it’s much worse. And firing employees is a very expensive process.
So American companies, when the time comes, can quickly restore production volumes. But you can’t say that about European companies.

DAX 30

The above is confirmed by the European shares and in particular by the DAX 30 index. It behaves much worse than its American counterparts. Investors believe that the situation in Europe may start deteriorating rapidly again in autumn. Although, how much worse can it be? Therefore, those who prefer to invest in stocks, quite reasonably choose the American stock market.

Bitcoin

The first cryptocurrency continues to grow steadily following gold. On Sunday morning, the quotes were at $12150. Then within 10 minutes there was a powerful correction of 1500$. It is a movement that we all missed so much while the price was 1.5 months in a narrow corridor.
What caused such a sharp drop in the bitcoin? There’s only one reason. The stops were triggered and the price went down. If you look at the history, you can see that Sunday is the leader in such movements, compared to other days of the week. Big investors and speculators are resting, so even small sales volumes can move the market strongly.

What’s waiting for us today?

10:00 EU Manufacturing Index for July
10:30 UK Manufacturing Index July
16:00 US Manufacturing ISM Index July

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

On Thursday the data on GDP in the USA for the 2nd quarter of 2020 were released. Gross domestic product decreased by 32.9%. This was not even the case during the Great Depression 100 years ago. Yes, many expect the situation to improve in the 3rd quarter. Or maybe not, because the coronavirus epidemic in the United States is still gaining momentum.

S&P 500

At the same time, American stock indices do not pay any attention to the negative. There is too much free money in the market, which simply there is nowhere to invest. Any assets are expensive.
What happens if a large investor wants to sell a lot of shares? He sells them, the price goes down a bit. Immediately, other investors with money buy back these shares for one simple reason. They become a little cheaper and that’s good. And the investor who has sold shares is sitting on the money and does not understand what to do with them next.

Gold

Yellow metal is around 1950-1960 dollars per troy ounce. Bears got a break before they break through the $2,000 level. There’s gonna be a lot of stops behind it again. Everyone understands that this level will soon be passed.

Euro

The European currency has confidently overcome the level of 1.18. As we wrote last week, everyone is already looking at 1.20 on the pair EUR/USD. Most likely, before the end of the presidential elections in the USA, the trend in the pair will be directed upwards. Now all factors contribute to the decline of the American currency.

Oil

Very interesting events on Thursday took place in the oil market. Black gold quotes collapsed by 6% on the news of a record drop in the US GDP. However, a strong directed day did not work out. Someone started to buy back the oil on the fall. And by the close of trading the total daily minus was only about 2%.
What does it mean? Does anyone really think that the situation with the coronavirus is about to go down? There are no prerequisites for an increase in oil demand in the near future. We assume that maybe somebody knows something. For example, we are talking about changes in the OPEC + agreement.

What’s waiting for us today?

03:00 Level of business activity in the service sector in China for July
08:00 Retail sales in Germany for June
11:00 EU GDP for 2nd quarter
11:00 EU Consumer Price Index June

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

At the meeting on Wednesday the Fed management unanimously decided to keep the key rate in the range of 0.00-0.25%. This was expected. Everyone was waiting for comments, which will follow after the announcement of the meeting results. Fed promised to use all instruments to support American economy. The interest rates will be around zero for a long time. Unemployment situation in the US is a separate concern.

EUR/USD

Once again, everyone is convinced that every month the market will be filled with more unsecured dollars. Remembering how much debt Americans have, the following suspicion sneaks in. Perhaps the Fed wants to artificially cause dollar inflation to reduce the size of government debt in relation to the GDP.

Euro

The EU has also adopted an unprecedentedly large economic assistance programme worth over €4 trillion. However, this is still less than in the USA. That is why the EUR continues to grow steadily. Of the last 9 trading days, the European currency has grown 8 times. This has not happened for a long time. And this indicates the strength of the trend.

Pound Sterling

The English currency, which we haven’t remembered for a long time, surpassed the important level of 1.30 on Wednesday. Now the way up is open, without significant resistance on the daily chart, up to the level of 1.35.
What can stop the growth of the pound? Theoretically, if the second coronavirus wave begins to develop, the British currency will fall first against the EUR and the Swiss franc. But against the U.S. dollar, almost no analysts expect a strong correction.

What’s waiting for us today?

10:00 German GDP for 2nd quarter
11:00 EU unemployment rate for June
14:00 Harmonized Consumer Price Index in Germany for July
14:30 Annual US GDP figures for the 2nd quarter

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

On Monday and Tuesday, the American dollar continued its epic fall. Bitcoin and gold made a real competition with each other. There were two goals. Which of them would grow stronger. And how much money will be lost by the short traders at the close of their positions by the margin calls.

Gold

Yellow metal rushed even faster to new highs, showing almost $100 growth in 2 days. A small correction looks like just a rest for the bears to lick their wounds. On Monday gold showed an absolute historical maximum. On Tuesday, the stops were knocked down even $40 higher. And, at any moment, a third set of stops, set at $2000 per troy ounce, could be knocked down.
Probably after that, there will be practically no bears left in the market shorting the yellow metal. On the other hand, gold sales may increase from large banks fixing profits. It is important for their management to show good reporting to their investors right now. Yes, gold could still grow a lot in a few years. But in a few years, the management of the banks will be different.

Bitcoin

During the 1.5 month flat period, we constantly drew the attention of our subscribers to the next important moment. The longer the price stays in a narrow range, the stronger the impulse will be after it exits. And such an exit took place on Sunday. The first cryptocurrency has risen to the level of $10,000. And on Monday, the mass shutdown of the shorts by margin calls began. The price jumped to $11,400 in a moment.
In just a few days, the bitcoin jumped 20%. And just as importantly, the second day in a row closes above the $10,000 critical level. If the price stays here for a few more days, it could completely turn over the minds of investors and speculators. What has been considered “expensive” for the last two years (above 10.000$) will look cheap. And the next target will be last year’s highs at $13,500.

What’s waiting for us today?

03:30 Q2 Consumer Price Index in Australia
10:00 ZEW Institute Index of economic expectations for July in Switzerland
20:00 US Federal Reserve Interest Rate Decision
20:00 Press conference of the US Federal Open Market Committee

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

27.07.2020 – Special Report. Inexperienced, but recently enormously successful day traders have apparently become a real stock market factor in the USA. Interestingly enough, millions of bored gamblers probably also came into contact with shares during the corona lockdown. The problem: Most newcomers positioned themselves mainly long. Which now causes frowning among professionals.

Stock market boom

Several experts have sounded the alarm in recent days. Following the pattern “what goes up, must come down”, the financial blog ZeroHedge reported on the one hand to the new mass of inexperienced and young traders. The App Robinhood allows anyone to trade anywhere. The fees are falling and it is easy. Unfortunately, many of these kids only know the way to the top. In fact, the majority of these newcomers are apparently positioned long: Jesse Felder, financial advisor and freelance journalist, already warned in mid-June of an unprecedented rise in Google searches for the terms “call options” and “day trading”.

The baby boomers sell to their kids

Goldman Sachs recently took the same score. Tony Pasquariello, Head of Hedge Fund Sales, said that there is now a clear age division among retail investors in the stock market. The older generation sells in bulk, mostly via index funds or investment funds. The younger generation, on the other hand, is trading on the long side, as if it were 1999 again, and the latest euphoria on the stock market could certainly still carry a little weight. The stupid thing about it, as ZeroHedge assisted: The baby boomers sell their own shares to their children.

Trader-Teens

As early as mid-June, the blog CSInvesting had reported with a photo of three teenagers with an apparently incredible performance that the kids beat hedge fund managers in performance. And then, under the subheading “Are you sure you know all this to become a day trader?” The motto: Don’t get cocky. In fact, a few weeks ago Morgan Barna of Bloomberg registered in a few tweets the considerable increase in trading volume in the first two quarters of 2020.

Dotcom bubble again and again

Recently, The Wall Street Journal followed up with an article entitled “Everyone’s a Day Trader Now.” According to it, e-traders had opened 261,000 accounts in March alone. Robinhood opened 3 million new accounts. We think: respect, perfect timing – the second quarter for the bulls was one of the best ever. However, the WSJ warned that all this is very reminiscent of the dotcom boom at the end of the 1990s. There are now more than twice as many retail investors in the market as there were at that time. We had already presented various crash warnings at this point. Particularly alarming: The paper quoted unemployed traders who immediately invested the government support on the stock market.

Small individual shares are problematic

In addition, the WSJ, citing Barclays, noted an unpleasant trend: the more the newcomers focused on a specific stock, the worse the performance. One example was the stock of Ideanomics, which had been pushed on Twitter by a retired police officer. Shortly after the promotion, the short seller Hindenburg Research published allegations of fraud and the stock plunged by 21 percent in two days and then by another 40 percent. Apparently a typical case of pump and dump. Especially inexperienced investors fall into such traps.

The lessons of the bull market

The bottom line for us from all this is that the brilliant recovery since the Corona crash has apparently also been driven by many new, risk-averse retail investors. When several experts with their ear to the market warn against young and inexperienced gamblers, we should bear in mind the bubble on the Neuer Markt, which blew out a lot of air about 20 years ago.
The new investors had recently backed the right horse, because the world’s central banks are pumping vast amounts of money into the financial market because of Corona. There is nothing wrong with that. But those who only know the way to the top may be too careless and not recognize the signs of the times. For example, warning signals from Behavioral Finance – such as when taxi drivers give you unsolicited stock market tips. Such a sign was recently sent out by “Bild Online” with the article “Should I still join the stock market rally now?” Ergo: Protect yourself.
The Bernstein-Bank keeps an eye on these and other developments for you – and wishes you successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

27.07.2020 – Special Report. Stellar performance in gold – the yellow metal is occupying traders and investors more than ever. Will gold become the new, eternal fixed star in the inflationary investment firmament? Or will the precious metal just be a supernova that will soon implode? The fact is: Gold is at its all-time high in dollars. The question is whether, in chart terms, a cup with a handle will form – which would be a super-bullish formation. Or whether the rush will end in a miserable double top. Which would please the bears. We highlight the backgrounds.

Gigantic cup – still without handle

Friends of chart analysis point to a gigantic cup formation that has been training in textbook fashion since 2011. According to chartists, when the chart image is to be completed, a sideways/downward movement is first of all necessary to form the handle of the cup. And then the price of gold should hiss steeply northwards. The sideways hesitation arises because many investors do not like to buy at the high and wait for a cheaper entry.
Mike Shedlock said on the blog MishTalk that the last resistance remains the intraday high of gold at $ 1,923 in 2011 and that the yellow metal has now formed a nice cup, albeit still without a handle.

In short, Shedlock said that gold always performs badly when confidence in the central banks is high. But the bursting of the DotCom bubble has now been followed by three major bubbles. Nothing has changed: The Fed is currently only supporting the financial market, but is not creating jobs and cannot cure Covid-19. In short: The Fed is pumping up a bubble. And Shedlock sees no end to this policy.

Great Debasement of paper money

Michael Hartnett, Chief Investment Officer of Bank of America, warned of the “Great Debasement”, i.e. the great devaluation. What is meant is the dollar, that is, the paper money. Because of the Great Repression, the Federal Reserve is currently experiencing a Great Debasement. The bond market has been nationalized by the Fed and is therefore no longer sending out meaningful inflationary or deflationary signals.
In concrete terms: investors could no longer use short bonds to hedge against the inflation risks created by the $11 trillion stimulus. The result would be only “short dollars” and “long gold”. In other words: Since the Fed devalues the greenback with freshly printed money, the only way to sell the greenback or buy gold is to sell it or buy gold.

The end of Fiat Money

And Jim Read, an analyst at Deutsche Bank, just came out as the Gold Bug. The expert concluded, “fiat money will be a passing fad in the long-term history of money.” This is drastic. The term fiat money comes from the Latin word fiat and means “It shall be done! Let it be!”, as in “fiat lux” – let there be light. Fiat money is therefore an object without intrinsic value. And Reid went on to say: “Gold is definitely a fiat money hedge.” Gold is therefore a hedge for paper money that is about to reach its historical end.

Price target 2,000 and 5,000 dollars

Citibank recently judged that gold is benefiting from the relaxed monetary policy, low real interest rates and the influx of money into index funds at record levels. The chance that gold will rise above 2,000 dollars in the next three to five months is 30 percent.
There is even better: Diego Parrilla, who manages 450 million dollars in the Spanish investment fund Quadriga Igneo, said Bloomberg that the gold price could rise to as high as $5,000 an ounce. This in the next three to five months. Because in the coming decade, governments would save everything and everyone with the printing press to prevent a collapse of the system.

Central banks and retail traders are buying

In fact, the masters of money themselves bet on gold. According to figures from the World Gold Council lobby group, the world’s central banks continue to make steady and moderate purchases. In May, for example, they put 39.8 tonnes of gold in their vaults, which is slightly more than the four-month average of 35 tonnes. Even if it is 31 percent less than in the previous year’s month, which was extremely buoyant. All in all, this year’s total was already plus 181 tonnes.
Apparently not only the professionals are taking a liking to gold: As the brilliant blog “ZeroHedge” reported, young amateur traders are currently flooding the gold market via the “Robinhood” platform on the buyer side.

Gold fan for the Fed

And maybe the current gold rush has something to do with the likely imminent naming of a gold bug as governor of the Federal Reserve. Judy Shelton will probably be taking that very line in the Fed in the future.
Michael Msika, Bloomberg’s economic commentator, pointed out another interesting fact: since March the gold price has been rising. While the yellow metal is knocking at an all-time high, mining shares are still far from their 2011 high and there is therefore potential for a catch-up in these shares.

Possible double top

Our conclusion: In the end, the arguments spoke clearly in favour of the bulls. However, it is also possible that the bears rub their paws: A double top is possible – this would indicate a coming deep fall of the precious metal. This could be the case if confidence in one’s own future returns, for example in the wake of a corona vaccination, the economy picks up again and the world’s central banks and governments cut back on stimulus. We will keep an eye on the matter for you – the Bernstein Bank wishes you successful trades and investments!

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