Get my weekly reviews to your mailbox at the end of each week.
You will never have enough education. Here I share my views of the financial market in general, and from time to time, how to profit from it.
If you like these articles, make sure you read Out of the Rat Race, the book as you will find many eye opening facts and stories which I gathered over 25 years of learning.
As its name badly indicates, the S&P 500 Energy index contains... not 500 but 28 companies. Still, you find in there the largest US listed companies providing energy to more than 300 million people, such as Chevron, Exxon Mobil, and another 26 peers. Why bother you ask? Well, this week, one company alone got worth more than the entire energy sector in the US. This company is called Apple.
In the past week, my total running distance since 1st January this year reached 4 digits. As a consequence, my third and last main goal for 2019 got ticked. It’s important to set goals. It helps keep you on track and motivated. Although it is a bit early for end-of-year goal setting, there is never a bad moment to review and improve the process. Here we go!
During this last month, I talked about the failed IPO of We Work. Well, this week, their founder-CEO got politely asked to leave the company. As SoftBank, the private investment fund who put in £10b into We Work, was adamant they wanted to take back control, they removed the ex-CEO from the board and took all his voting rights. Well, this removal of rights happened to be in exchange of a departure fee... of $1.7b 🤑. In the corporate world, that is called a parachute... Time for us all to assess if we have any in case of a freefall...
You do not need to trade to take an interest in this. Let me tell you that this battle for avoiding the upcoming recession will have repercussions into your daily lives for the next decade. If the Central Banks and powerful Kings-aka-Governments win, there will be asset inflation for years to come making the rich richer and the middle class will have the priviledge of having job security in exchange of not being able to afford the cost of living (mostly the cost of buying a home). If they loose... there will be asset deflation for at least a couple of years making everybody poorer, except the 0.01% few. In any case, the game is rigged, but in any case... you are in the game, so everyday, you have to play your hand.
Brexit got delayed again today, for what seems to be the 1000th time... As a Frenchman having made my home and life in the UK (nearly 20 years now), one would think I would be pro-Europe. In principle, I am. Had I been allowed to vote, I would have voted remain. But as we can see, politics are more and more un-principled. Bloody hell, get done with it and sign this Brexit divorce now!
Looks like one trillion dollar does not buy much these days. I am not talking about Zimbabwe dollars, but King of all currencies, the USD. Yes, this is another inflation, deflation and manipulation story. But how could it be different? The Fed just announced a $60b per month repurchase program. That level of money printing would pay the Brexit divorce bill in 2 weeks... For the first time, I am going to start using emojis... 🤦
This week is about property. With asset inflation to infinity and beyond, nobody seems to have enough capital to buy anything anymore. We do not buy cars anymore (check on the car industry to get a flavour) but we take a Uber when needed. We Pay as we Go and we "Whatever" as a Service. To give an example, I recently saw a new one: "Brain as a Service". Oh well... why not! So it's probably logical that the new landlords of the 21st Century do not buy properties. Instead, they rent them to sublet them at a profit. And there is even a fancy name for this: Rent to Rent!
With so much big news this week (process of impeachment in the US, the Supreme Court ruling the U.K. government acted unlawfully, Thomas getting cooked...), I was very unsure what this weekly review should be about. Until I dug further... I'm sure you have heard about We Work (who has not?). Well, their IPO attempt failed. No big deal you may think. I thought this too. Until I dug under the carpet... Oh there's a potential time bomb here!
I learned two new concepts this week. The first one: we are in an earning recession, which means that the average of the most powerful public US companies (SPX again!) have seen their profit go down for two quarters in a row. The second one: the FED mandate, which until now was known to be "to promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates" seems to have wobbled. The FED did lower the interest rates (by 0.25%) this week, announcing that it did so because of the big companies earning recession... Hello???
This week, the European Central Bank lowered its interest rate. Again... From previously -0.4% to now -0.5%. Those on a variable mortgage indexed on Euribor are having a laugh and a free mortgage... What more? The ECB also gave guidance that until probably at least mid-2020, the rates will stay the same or be lower... Meanwhile, the King of USA is wondering why the FED does not compete on this race to the bottom...
This past week was everything about invalidation of risky events. No deal Brexit? Invalidated... Italians having to go back to the polling stations and elect a new far right government? Well, invalidated too... Chinese trade war? Invalidated, at least for now... SPX going down the hole. Yes you guessed it. Another one which got invalidated!
A little friend called Silver is sending us warning signs. It only does this when feeling distressed about the world economy and the risk of either conflict, recession, downturn, or other gremlins... So when it sends its signal, you have to listen...
One one side, you have the powerful Central Bankers who print money like there is no future consequence. In 8 years at the head of the European Central Bank, Mario Draghi never ever raised interest rates, having for consequence the abnormal 30 years german bond paying negative 0.11%. Yes, you have to pay the German state to lend them money over 30 years. Or the negative mortgage in Denmark as we saw recently. On another side, you have the powerful Kings of their competing empires...
A bank in Denmark is offering negative rate mortgages. What does it mean? You take up a 10 year fix rate mortgage with them, and they pay you 0.5% per year for the privilege of asking them money. They also have in store a 20 years mortgage for 0% interest. Yes, free money over 20 years...