Market Review & News

Market Review & News


INTRODUCTION

 

Welcome to year 2018. The team at EssenceFX would like to thank all our readers for their continued patronage and support towards our reviews.

First and foremost, we’d like to bring to your attention to our now well-established inaugural predictions by reiterating on certain statements made and questions thrown; our aim here at EssenceFX is to provide everyone with complete and unbiased news coverage and this is to show all our readers that we believe strongly in preserving a clear long-term research direction. Therefore, reinforced again below are our long-term key themes (with main points highlighted in bold):

  1. In an era driven largely by sovereign fund movement and other large capital flows, fundamental and technical indicators seem to show decreasing reliability in aiding one to anticipate market directions. It has become near impossible to gauge a clear picture on the global economy without pivoting the importance of global political risk, large capital flows and its influence towards behavioral finance”.
  1. Conventional research and media, and now even regulated financial indicators often times tend to underplay or even hide the importance of certain key issues which stand to impact the economy. Whether this is done to preserve global political harmony, or to preserve the financial interest of certain large parties; this act of withholding or underplaying information is damaging mainly towards retail trade positions”.
  1. Where has the money gone / going? ; Are we in a financial war? ; Who’s allied with whom? ; Can prices keep on going up ahead of income? ; Who are the game changers? ; Will there be a single world currency? ; How manipulated are global asset prices? ; Why are alternative asset classes rallying? ; Why is stagflation no longer a myth? ; What’s driving privatization?”

 

In reference to our previous research focus and questions thrown; moving along 2018, the team here at EssenceFX would like to enlighten our readers on how these points have been revolutionized and elaborate further on how it would ultimately link towards our opined three main key economic / social themes for this year:

  1. Elite governance through fund flows – “Elite Theory”.
  2. The amplification of the “Gen Z” focused “Psychological Warfare”.
  3. The total “Tech Sector” takeover” –“Technocracy

 

 

At this stage, there is some likeliness that we’ve confused you a little (or a lot) but that’s alright because we’re here to clarify. How will we do this? That’s right! Just as how we did last year; The team at EssenceFX would like to invite you to ponder over the abovementioned three main key economic / social themes while we present to you our identified 2018 global economic subthemes; the driving forces in which we here at EssenceFX believe is strongly relevant for 2018. Do enjoy how they are somehow able to magically intertwine with the bigger picture! (and pstttt....this year we present to you some "TRADE IDEA's as well as areas of investments to avoid... aren't we simply awesome?

 

Scenario #1:

Are migrants really to blame for the loss of domestic jobs? There seems to be much market talk these days about the possibility of a 2018 Italiaxit, Swexit, D***…(okie we shall stop sounding absurd by abbreviating further) ..erm Denmark, Greece, The Netherlands, Hungary, and more to possibly leave the European Union mainly playing in to the widely spread mainstream media narrative on the loss of jobs domestically to foreign workers. In a smaller scale view, Trump invoked “populism” puts forth a psychological breakthrough which sets good precedence for potential recurrences in the European Union; a valueless statement by us if left merely as such.

However on a bigger picture, does anyone notice how this has been spread by mainstream media as more of an issue compared to the loss of jobs due to our advancements made in technology? There has been ongoing expansion of robo factories, there are now robo financial advisors, and there is now an industry called 3D printing for example, yet we hear very little media emphasis placed on these technological revolutions. In addition, notice how trading blocs are continued to implicitly be formed? i.e the TPPA deal had it gone through would not have included China; BRICS for example on the back of China, have been weaving deeper connections with one another; a silent implicit counter faction against NATO. Therefore let us ask you once again; if the elites ideally have the final say in deciding what’s best for the country (and their self-interest), coupled with their capitalist driven initiatives to rely more on automation via technology (to for example, protect their cost competitiveness), then ideally who’s to blame for the loss of jobs really?

TRADE IDEA: BUY Tech stocks; BUY Nasdaq index / AVOIDDisrupted by tech businesses i.e Print media,  Job recruiting companies, Physically reliant substitutable businesses

 

Scenario #2:

In regards to what we said previously, how measurable is the threat of privatization to date? Here’s a snippet from KPMG’S 2015/2016 Privatization Barometer report with a main header titled: "Two Record years herald an ongoing privatization wave". If the title is not indicative enough, then check this out: The large number (903) and value [$586.3 billion (€530.9 billion)] of privatizations executed during 2015 and 2016, coupled with several massive planned sale announcements—especially Saudi Aramco’s mooted $100 billion IPO in 2017 or early 2018, suggests that the massive global privatization wave that began in 2012 continues unabated. For the rest of the report, do click here. That’s right. This is exactly what’s happening today yet, very little of it is reported or emphasized over mainstream media.

What about the trends in Initial Public Offerings (IPOs)? In regards to 2017, the EY Global IPO Trends Report found that a total of 1,624 IPO's were issued and raised US$188.8b; the most since the 2007 financial crisis. Although this is an increase compared to the previous year (2016: 1,055 IPOs; US$132.5b), this still falls below the amounts raised in years 2015 and 2014. In 2015, there were as much as 1,258 IPOs issued raising US$197.1b while in 2014, there were as much as 1,206 IPOs issued which raised US$256.5b. If compared to figures before these dates, we will still be able to identify an ongoing reducing trend. For the rest of the report, do click here. 

How do you think the trends for privatization and opportunities for fresh stock investments would be like in 2018? 

TRADE IDEA: HOLD bluechip stocks; HOLD major indices / AVOID: Businesses which lack (or lack potential) for economies of scale  

 

Scenario #3:

Do you realize how long your kids are spending on their, what we’d term as ‘internet integrated’ devices? The collective answer from various sources which we’ve been able to gather: Approximately 5-7 hours per day. We think “Black Mirror” is a pretty relatable television series and let us explain this observation further. The digital domain is the preferred medium for an array of activities for the Generation Z and in time, studies have shown that the digital domain will soon shape the way they live, play, and eventually work. Therefore, while the ‘financial warfare’ has played a notable part in almost 10 years since the 2008 crisis, the team here at EssenceFX strongly believes that the ‘psychological warfare’ will be the elite’s new medium of choice for the upcoming decade to preserve their dominance in society. Once again, the Americans and Chinese take on the global centre stage. According to Newzoo.com as of October 2017, China and the United States are amongst the highest in terms of gaming revenues categorized by country with US$32.5 billion and US$25.4 generated respectively. While only Japan ranks at a notable yet far off US$14.1 billion, other countries rank pale in significance. Just to note from the previous year, China were almost head to head with the United States with US$24.3 billion and US$23.5 generated respectively. In just a period of one year, China has expanded their revenue outreach by 33.8%.  

Why such strong emphasis on gaming? Let us redirect you to our “Black Mirror” television series reference. Creator Charlie Brooker places forward this question ‘if technology is a drug – and it does indeed feel like a drug – then what, precisely, are the side effects?’  In a parallel perspective renowned author / marketing consultant Simon Sinek argues that we are raising an entire generation on dopamine driven by technology whereby the human effort is substituted by an intangible abstract replacement. Therefore this leads us to further question: If there was a directed effort by certain 'parties' to condition desired behavioural patterns through such stimulus, then what would be the end result on our children, in such a tech driven society? Well as a recent find for one, The World Health Organisation (WHO) has for the first time, included "gaming disorder" in its list of mental health conditions in a draft of its 11th International Classification of Diseases guidelines, which will be published in 2018. 

Given that 100% of generation Z are connected for more than an hour per day while a whopping 46% are connected for 10 hours per day, and at least 54% of generation Z play video games for at least one hour per day as pointed out by a study conducted by Northeastern University, coupled with the finding that 75% of teens want to convert their hobbies to full time jobs; there are now universities promoting courses termed as ‘Esports’ – ones which recognize gaming as a career (check out the growing range of universities which are starting to offer them here ). If game time increases in significance in our children’s lives moving forward, will they not then be heartily conditioned to live more of their lives in some form of alternate based reality? ‘Google Blocs’ for one allows you to claim territories akin to a real time map. Time Warner’s acquisition by AT&T for one would integrate: “mobile environment to drive demand for his company to invest in 5G, which will deliver 1 GB speeds in mobile technology – we view this as deeper content control purely. United Kingdom's regulators published a 70-page tome on its future 5G strategy and stated that they would invest up to £16m to run trials and support the technology’s development, to make sure the UK is at the crest of the “next wave of mobile technology services”. How far will the politically tech driven industries and its various innovations shape our 2018 and our near future? Do stay tuned to find out! 

TRADE IDEA: BUY Virtual Reality stocks; BUY Gaming & Computer hardward stocks / AVOID: - 

 

Scenario #4:

How much discord can you spot between policies of the United States of America and China? There are ample angles and various arguments which can be formed based on this but let us focus on and map it out briefly by discussing these key elements of policy stemming from perspectives of:

  1. Economic – China’s strategic devaluation (and control) of their currency
  2. Environmental – China’s green energy initiative and infrastructure investments
  3. Technological – Virtual + real world integration (as previously discussed)
  4. Political – The growing alliances (i.e between the Chinese and Russians); amidst China’s exclusion from the TPPA
  5. Social – The growing prominence of high quality China goods

Let us keep this brief and eye our focus in an economic sense, since it correlates the most with the asset class of interest: CURRENCIES. There is much prominence on how China has historically expanded their reign globally via manipulation of their currency. Interestingly, when the Federal Reserve was busy printing fresh credit and continued injecting it into their system (at the expense of an ever-growing and constantly revised ridiculous debt ceiling), China’s dumping of cheaper goods into the US economy in particular has worked towards their advantage; excess ‘credit’ has been sucked away from US and has continued to flow into the Chinese economy over the years. China now holds more than 1 trillion worth of U.S debt; a potential nuclear-like financial bomb over the entire American economy which if they choose to, can tactically destruct in time. How and why would they do this? (by the way which once again when 'Googled' shows little or almost no available information on the matter) The preferred answer by us here at EssenceFX to that question is when they’ve well refined their 10 key industries for 2025. Notice something fun here? That’s right, these targeted industries heavily correlate with the top 5 American export sectors. What will happen to the United States at some point in time if they were to be under heavy economic pressure due to failure to commit to such growing debt? That’s right, their export demand would then flow to China. How much is this exactly? Well, think Samsung and Iphone. The literal ‘destruction’ of one device eventually lead to a spike in demand for the other. Surely, there would be no need for us to elaborate on this further? 

TRADE IDEA: BUY Chinese indices; BUY Renminbi / AVOID: - Businesses threatened by renewable energy / businesses pressured by high debt 

 

Scenario #5:

Have you realized the amount of contradictions mainstream media has successfully fed you over these past few years? Here’s a list of perverted financial instruments and arguments which follow the in our opinion, senseless mainstream arguments:

  1. Oil
  2. Gold
  3. Bonds
  4. Equities
  5. Currencies 
  6. Cryptocurrencies?  

Let us start by saying that mainstream media mostly reported an almost zero possibility for a Brexit outcome and for a Donald Trump United States presidency to take place. Keep this in mind.

Now, let us move on to the global price of oil. Have you noticed how mainstream media has been feeding you information about the price of oil for let’s say over these past five years? i.e the price for oil per barrel to be 100? 20? and perhaps the 'new normal' to be about 50?Whatever the figure may be, you must have already realized that reliance on such forecast appears to be rather ‘academically comical’. There seems to be more and more evidence of mainstream media herding the masses towards a certain direction and then gearing everyone to accept a surprise heartache. 

For gold, it used to be the hottest commodity to invest in post Brexit and pre-Trump until the end of 2016, when we witnessed the price of gold suddenly heavily tumble down on colossal profit taking (the IMF maybe?).

Bonds during the periods of aggresive global 'quantitative easing' ventured into formerly unheard of, negative territory. Nonetheless, insurance companies for example, continued to hold on to these bonds to comply with their 'AAA' class asset holdings investment mandates. However, was that really what brought them deeper into the negative zone? The major American indices continues to rally, namely the Dow Jones index and the S&P500 - steamrolling it’s way upwards partly supported by colossal central bank buying (as part of their measure to cushion against their large holdings of negative yielding bonds). The Swiss Bank for one, emerged as one of the largest US equity buyers for 2016. Corporate leverage continues to grow tremendously and the United States still continues to struggle to achieve their targeted inflation level. Despite this, American indices still continue to rally due to our afromentioned reason. How sustainable is this over the longer term? At least for us here at EssenceFX, we opine that 'central bank' buying will eventually reach a ceiling of sorts at some point.  

In regards to currencies, The Great Britain Pound (GBP) and Japanese Yen (JPY) in our opinion, was subject to and continues to be subject to heavy manipulation. Hence in our written piece HERE, we opine  that the GBP flash crash was NOT due to a ‘fat finger’ but rather, a colossal institution amendment to their portfolio (the JPY for that matter too). The fun part about such large movements is they tend to take place in the span of a week or so and for some asset classes, in a mere matter of minutes. Similar to the previous years, we anticipate a continued likelihood of such movements to take place this 2018. 

Cryptocurrencies have become the hot topic of 2017 and in our opinion, will continue to take the limelight this 2018; we attribute much psychological conditioning once again, to mainstream media and their irresponsible headlines which continue to herd the masses towards the hype in cryptocurrencies. Given the huge significance of this asset class, we shall further elaborate our findings down below as a new 'scenario'. 

TRADE IDEA: BUY Gold; BUY undervalued 'cryptos' with high market capitalization / AVOID: - overvalued 'cryptos' and ambiguous Initial Coin Offerings (ICO)

 

Scenario #6:

Have you noticed the divergence in values / mentality between the 'Generation X (Gen X)'  and the growingly significant 'Generation Z (Gen Z)'?

If you haven’t the team here at EssenceFX would like to invite you to check out this video which briefly elaborates on certain psychological differences between these two generations. Amongst all of Simon Sinek's findings, we opine that ‘dopamine’ stands as an important takeway which we'd like to further elaborate on in regards to the significant growing divergences we have spot in the financial markets. The team of us would now like to further break down these points; interwine them with our three main key economic / social themes, and explain them as follows:

  1. Technology – main thematic / propagated tool (technocracy)
  2. Parenting – as conditioned via ‘consent’ 
  3. Impatience – a spill over effect of the controlled environment and technology
  4. Environment – as set by the regulating elites

Imagine a world without Facebook likes. Imagine a world without virtual payment systems. Imagine parenting without the use of any electronic devices. Imagine a world without 'Google' and lastly, imagine a world without electronic capital controls (Note: This final point has been recenly challenged by the growing use of cryptocurrencies). While the baby boomers could be able to do without this, those who edge closer towards 'generation Z' would deem such a world as impossible. For example, likes on Facebooks have led to the birth of career bloggers and social influencers, two terms which can somewhat translate into modern day income generation for those who are able to sucessfully partake in it; take for instance 'unboxing' which has surfaced as a new age subculture which involves watching kids unbox their toys. In relation to this, Forbes recently reported that a 6 year old boy made as much as USD$11 million just by reviewing toys alone. Applications like 'Amazon' or 'Ebay' allows one to be a seller on their own personal domain, directly connecting them with interested parties to partake in sales and purchase arrangements for profit. Computerization is now very common in schools where almost all areas of studies are well integrated with it's usage (with some universities as afromentioned, go as far to promote ‘esports’ as a career). 

Delving deeper, in regards to what we have mentioned above, let's now take the 'iphone' and 'Facebook' brand and examine it's implications in regards to the average Gen X and Gen Z individual. While the Gen X might escape such technocracy, recent studies have shown that Gen Z regard mobile devices to be part of their body. Hence, the usage of at least a smart phone and some social media platform is almost a surety. In regards to parenting, while the Gen X largely rely on manual operations and modes of communication (i.e house phone, postal mail), the Gen Z most certainly prefers a more mobile way of connecting with their peers and will most certainly make use of more 'instant messaging' features as a mode of communication; this has in hand led to some impatience within the Gen Z individuals who complain about stuff like 'slow internet speed, slow deliveries, slow acknowledgement, etc). Without realizing, both iphone and Facebook have direct influence over the features and content exposure presented to the individual. As brand conformity grows, so does the technological rules which govern them. For example, it is unlikely to expect for a user manual for an iphone or to not be reminded of a birthdate by Facebook. On a more negative end, it is unlikely to have to witness any advertisements on 'iphone' to remember the brand nor would it be possible for anyone to control the advertorial content one would be exposed to from Facebook. 

 

Scenario #7:

In your opinion, what determines wealth of a country and the health of its economy?

I guess some might have guessed the amount of natural resources available: i.e oil, metals, land, water, etc. Perhaps some may have said financial reserves?; the idea of countries having ample holdings of gold and currency in their national reserves. How much of a surprise would it be to you if we were to say, perhaps Sierra Leonne should rank as one of the world’s top 10 economies if based on this order? How much of a surprise would it be to you if we were to say, that among the largest economies in the world, almost none of them share your perceived criteria’s but instead; they are heavily burdened by debt. Please do let us enlighten you with this video and next, do check out this link HERE

It’s a no brainer to many today that even the most perfect computer security systems are capable of being hacked. It is also no surprise through the many recessionary cycles we have faced in history, that government policy is always far from being bullet proof. Following this argument, the question we would like to post forward is this: 'why are we still adhering to a 1929 Keynesian economic school of thought, when government debt continues to balloon to levels once unheard of before, and with (let us be very deeply honest here) no intention whatsoever of repaying back such debt. While barter always offered unrivalled interaction of ‘value’ as determined by actual demand and supply; fiat based transactions always fell short. Instead, they pervert the whole idea of equitable outreach. Clearly, the only relevance the Keynes economic model is still good for (and is also why it is continued to be relied on) is because as quoted: "Keynesianism appealed to two overriding motivations of government officials: i) their need to appear indispensable, and; ii) their urge to wield power. Keynesianism dangled these ideas before the political class, who in turn responded like salivating dogs. Therefore, the simple determinant on which country lies economically ahead of another is purely “supremacy”. Have a look at the list of countries in terms of debt as well as resources and compare and contrast their state of welfare to one another. You’ll get what we mean; growth opportunities almost never hold strong significance for resource rich, low debt, and underdeveloped countries yet stagflation in developed nations, is what continues to make the headlines.

 

Scenario #8

Are global asset prices largely manipulated?

For instance, this is the year we witnessed the price of oil tumble to US$26 per barrel (US$ 120 on 2013) while both the Dow Jones and S&P 500 indices breached new highs. For the first scenario, since oil companies are still sustaining their businesses despite such a tremendous fall in price, does it not make you wonder how much we have been overpaying in premiums all along? Likewise when industrial production continues to be depressed, corporate profits continued to be pressured, margins continue to thin, and debts seem to be elevating to new highs, how are equity indices rallying? What happens when interest rates start to rise?

While investors would view this as a problem; we and our happy trading bunch here at EssenceFX would like to term this as a golden trading opportunity. Do notice that these indices have already been flushed off for several rounds starting stagnating tops effective late 2014. Bernie Madoff once had a great deal of fun with these indices and a modification of his approach is exactly what certain big players out there are utilizing to flock sheep to a false holy grail, and reap sacrificial lambs. This time around, let us outsmart instead of be outsmarted. Be the wolf in sheep’s clothing!

 

Scenario #9

Why are alternative asset classes rallying?

Simple; the search for higher yields since post the 2008 global financial crisis. Amidst the political turmoil we are in, coupled with a prolonged toxic low interest rate environment, a couple of things have happened. Yields on highly rated bonds have moved into negative territory amidst a flight to safety, equity prices have become so inflated to the point that it shows little upside in reflection of current intrinsic value, and property prices have overheated to the point that in some countries, a growing majority are becoming more accustomed with the idea of just paying rent instead of going for actual ownership. What happens to selected commodities which can act as a substitute for currency during times like these? Yup you guessed it. They’d rally. The same explanation would hold for even something virtual like bitcoin.

 

Scenario #10:

Given the recent rise in popularity of blockchain and in some instances 'government backed cryptocurrencies, is the world now edging close to a single world currency?

n relation to our forecast, EssenceFX would like to bring your attention to the the staggering psychological difference, or rather we think better said, the  change of mind set between the value the younger generation places on gold compared to the older generation. With the ongoing developments in cryptocurrency and permissible blockchain, we’d think it’ll only be a matter of time before a central bank pledges allegiance to a virtual reserve currency. This will be little of an issue as credit based spending, mobile wallets, gaming credit, virtual bidding (the closest best thing to barter) and other terms virtual hold stronger relevance to the younger generation as compared to gold alone. Therefore although we are strongly bullish over the medium term on gold, we strongly think that gold will die completely as an asset class over the longer term. The signals towards is subtle yet we think largely applicable. The IMF integrating the Chinese Renminbi into the SDR to make it a more inclusive currency basket (yet at the same time, oddly not fulfilling criteria’s for inclusion https://wealth.goldmoney.com/research/goldmoney-insights/gold-sdr-brics), the support Microsoft is extending towards Bitcoin (article), and Google’s lobby for ‘open coin’ are clear code red signals pointing towards a complete shift towards digitalized currency. In addition, the previous official talks about it eerily correlates 18 years ago on November 8th 2000, the same date last year on when Trump claimed his victory. How would you take it; would you go ‘physical’ or go ‘virtual’? 

 

We are the 99%.

The inflation narrative which has been blatantly accepted by is continued to though and is still being passed down to our children. This has resulted in enormous wealth creation for the elites.

The zero-sum game has resulted in too huge of a poker table for the average person to buy-in. Can one actually beat the ‘house’ with the amount of ‘free chips’ they have access to?

The inflation narrative cannot possibly go on forever given the GINI disparity; which kicks middle classes of society into a lower income bucket. Like what Pink Floyd said, will you just be “Another Brick in The Wall” or will you start to question further via tuning in to our further updates and by watching videos like this?

The choice is yours. Happy 2018 everyone! =)