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Market commentary “Wrapping the Week”

Alion Partners Capital LLP

Brokerage advisory and consulting

Welcome to another edition of Alion Partners Capital LLP’s “Wrapping the Week”, the place where we (a bunch of serious market guys) write our views about what has been going in the markets during the past week. Our commentaries and analysis are like no others’ – we take a humorous approach whilst trying to make you think about serious matters- Our aim is to be informative, analytic, precise, thoughtful, yet light and entertaining for a Friday afternoon.

Right, hello. Let’s get straight to it.

Another week of volatility and seemingly significant headlines start to surface a somewhat doomed picture for the coming 2019. It’s so easy to be bearish, almost too easy…

The news is awash with negative upon negative headlines. Despite of the Brexit shenanigans, the main story from Europe this week has been Macron’s policy reversal and the long-lasting consequences it could have on the already fading “ever close Europe” vision of our policy overlords.

Macron’s concessions set to blow out French deficit

I think such a swift U-turn in the face of EU deficit rules has finally put the nail on the coffin to any idea of EU debt sharing. Germany will look at this move and think – no thanks. Italy’s position might throw further confusion into the ring, as Rome could argue that France should not be treated differently. As so often happens in the EU, the rules are there to be broken! The power of debt once again strikes.

… and all this happening whilst the ECB winds down its QE program! One can really see why, given the proportion of the Eurozone economy its balance sheet now represents (from Holger Zschaepitz). Nearly 42%! I’m still glad that scares me.

At least they are not doing a Bank of Japan and buying ETFs yet. Speaking of which, another good article on the dangers of these products if not understood correctly:

The ETF liquidity question: Can the passive universe hold up in the event of a market crisis?

In a bull-market, liquidity to sell is always there. I wouldn’t count on it however during a bear-market. Especially with regulation and technology creating a situation where there are so few “real” market-makers left.

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Moving on, the Deutsche Bank debacle continued at pace. People are finally waking up to the fact that at this rate, it will have to be taken over by the German government (probably contravening state-aid rules, but hey who cares, right?) and merged with Commerzbank (or “Comedy Bank” as we used to call it on the desk!). Again, this situation so far into the cycle, is deeply disturbing. The two largest listed banks being forced to merge 10 years AFTER the financial crisis…

This past year could really have been just a warm-up. The US indices are more or less flat but overall China is down about 30%, DAX down 20%, Oil, Copper and Nickel (the best commodity indicators) down 7%, 14% and 14% respectively. And the liquidity keeps draining away. Perhaps the authorities realise they just can’t keep going on printing money – there are limits to its efficacy. But let’s see what happens if markets really fall and a recession starts to bite. So many times lines have been crossed, rules broken, norms trampled over. When markets are in the red and people are out on the streets – politicians bend. Just look at Macron: he styled himself as Jupiter, the Sun God, yet a few fires and smoke bombs in some upmarket Parisian arrondissements and, quick as a flash, he folds.

Across Europe problems remain with a dark foreboding of worse to come:

 

 

The above German GDP forecasts (DailyShot) and Car Sales in both China (Chigrl) and Europe (Bloomberg) paint another picture of concern.

Anyway, let’s take a step back.

The below article’s message about Smartphones can easily be extended to all manner of goods. Has the West reached a point of “Enough”? Are we all sufficiently satisfied with our material needs that improvements and/or new products are increasingly never good enough to get us excited? Are we moving even quicker to a place where consumption is focused more on experience rather than ownership? And what does that mean for modern capitalism? This is a REALLY great read:

How the smartphone economy ate itself

Market and economic cycles have not yet been controlled by our species, despite many a politician and central banker attempting to do so.  The next downturn, whenever it may be, will help us to understand what we really want, what we really need and help allocate our energies and resources in a far more efficient way.

The negative narratives that we are seeing in the press these days are nothing compared to what might come ahead, yet as we all know there will always be opportunities to grab. And when everyone gives up and throws in the towel… strike, and strike hard. For the night is darkest before the dawn. Get ready for a rollercoaster in 2019!

Though admittedly dear readers, this has been the least jovial issue for a while, it is not all doom and gloom… For all you single guys out there I have good news! This lady, after a brief spell of unavailability, is now back “on the market” again (can I just say: seriously, in this day an age?!)

An Irish woman who married the ghost of a 300-year-old pirate claims the couple has split up.

I hear you, terribly sad…

Have a Great Weekend and see you next week, for the last issue of the year!

The Alion Team.

 

Important noticeCopyright Alion Partners Capital LLP 2018. Not for reproduction or retransmissions without written consent from Alion Partners Capital LLP. This is a Market Analysis and Commentary and not an official research report and the views expressed in this document are those of the author(s). The author(s) are not registered research analysts and there is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Past performance may not be indicative of future results. Alion Partners Capital LLP is authorised and regulated by the Financial Conduct Authority with number 540688.

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