The dark side of the force

I have to say, I love it when the markets go up. Since I was very young in this profession – even if I didn’t grow much – I have a lot more fun when it goes up than when it goes down. It’s quite easy, it’s natural and instinctive. We are all happier when things are going well than when we are on the brink of depression and economic collapse. Or even worse: the mortgage crisis. The current period is not easy, we are in a real macroeconomic crisis, caused by what we knew only in theory. Or in practice, but only in those countries where we go on vacation. And suddenly we lose our bearings and wonder…

Audio recording from July 22, 2022


Download the podcast

Is everything really better?

We wonder what we should really think, should we just celebrate the fact that things are on the up again – as the US market is showing – and that we should just be happy with the fact that the quarterly results are FINALLY not as bad as we feared? Should we just be satisfied with the fact that everything is “less bad”? Or should we still worry about what comes next?

No, because I want to believe that the fact that Tesla posted positive numbers despite the 100 million bitcoin seizure can justify a 10% bounce in the title. I’m willing to admit that the fact that Netflix lost “only” 970,000 subscribers versus the 2 million they themselves expected to lose could also explain the 10% recovery. And it suddenly makes sense that the Nasdaq is up 12% from its lows. However, there is still something that bothers me and prevents me from living in my Taurus state with an absolutely free mind. And the thing is, if we list the reasons why and how we are in a “Bear Market” in most global indices, we quickly realize that nothing that served as an alibi for us to fall has been resolved recently.

The same player shoots again

Out of control inflation is still “out of control” and we’re just hoping we FINALLY peak in August, but nothing less certain. While everyone is betting on price rises to stop or slow down, no one mentions that inflation could remain at 9% for months. That central banks will continue to raise rates and slowly kill the economy while inflation stubbornly refuses to come down. I understand that most financial experts are telling us that the market has already “priced in” the fact that we are about to enter a recession, but how will we react when it is explained to us that we are indeed in one? Would we consider it normal that we took 25% of the minimum just because “we knew” and what we expected?

What if the CPI numbers show that the many rate hikes that central banks around the world have implemented are not having an impact? Will Ms Lagarde continue to remain calm by suddenly raising interest rates by 0.5% as she did yesterday, telling herself that “everything will work out in the end”??? All this while Italy and its debt spiral out of control, drilling holes in the hull of Europe’s Titanic as it struggles to stay afloat? To be honest, I don’t know and I don’t know. The thing is, I’m very happy to see the US market end up for the third session in a row and to see Tesla shareholders pouring champagne to celebrate, patting each other on the back with those who bought Netflix the most down. I find it very cool that when the ECB announces a 0.5% hike in key rates, bringing rates back into positive territory for the first time in 11 years, the Italian market immediately recovers by 2% because, and I quote, “this is proof that the ECB wants curb inflation” (and suddenly we don’t care like in 40 because Draghi is leaving, the country is entering a NEW POLITICAL CRISIS and the debt is still 150% of GDP, which is huge for those who doubted)…

So !!! No joke!!! What did you expect? Let Lagarde come and say:

“I don’t care about inflation, I get paid 500,000 bucks a year and I’ve been a millionaire for a long time with everything I put in my pockets when I was in politics with Sarkozy and I ate under a tent with Gaddafi, what do you want for me to do that a full tank of gas is 50% more expensive than a year ago?? I DON’T PAY FOR PETROL, it’s the ECB who pays, idiot!!! »

But

But having said that, when I read what I read, I see that Deutsche Bank sees Germany and Italy in recession by the end of the year, that Putin keeps all of Europe on the sidelines through the gas tap, that most companies like Google, Microsoft or Apple start say they’re going to slow down commitments and calm the spending game, that we’re starting to see more companies cut back on their investments in the cloud — a cloud that’s still a cash machine for some companies (Microsoft and Amazon in the lead). I am told that China is slowing down, that Pelosi wants to go to Taiwan to talk to the semiconductor industry, and that China is against it. What we mean is that the stock market does not grow in those companies that have shown very good indicators, but those that have shown indicators that are less worse than one might have feared.

And of course, we also shouldn’t overlook announcements like last night’s from SNAP that show things are slowing down. The social network has released some rotten numbers, but above all a sharp drop in ad revenue as everyone pulls back the curtains on spending. The name was destroyed by 25% after yesterday’s close and dragged down companies such as Google, Meta or Pinterest. All these things, which are put in place dot by dot, do not still push the gaudiol and tell yourself that everything is fine!!! And again, I’m not talking about the war in Ukraine, global warming, households hoarding firewood like PQ did two years ago, and for good measure; In France, there is no more mustard in supermarkets.

Well, being told all that, I don’t mind being set because I like it. We would like to believe that it will improve by August, and from September it will be a party of economic underwear. That unemployment will be reduced to zero, that inflation will be under control and that the economy will be in great shape, and that churches and altars will be built in recognition of the work done by Jerome Powell, Christine Lagarde, and Thomas Jordan, but I don’t I don’t know… I don’t there are still doubts… I really hope I’m wrong, but when you see what you see, hear what you hear, well I think we have it all figured out. The reason we think is what we think.

In Asia

After Tesla’s excellent performance, Netflix’s excellent outlook, Madame Lagarde’s masterstroke and the fact that Draghi’s departure is making everyone laugh, all indexes in Asia are rising. Well, the increase in question is more or less homeopathic, whether in China, Hong Kong or Tokyo. The market again looks strong and unbreakable. Much like it was during the last 9 months of 2020 when money was pouring in everywhere and we were paid to take out loans and then go and buy cases of Dom Pérignon to celebrate. Apart from the fact that we don’t get injected with anything else there (except the Pfizer stuff), the champagne is hot and to get a credit, if you haven’t done 14 doses of the Moderna vaccine, don’t count on it. But luckily, Emmanuel Macron will go to the Tour de France by car and say hello to the firefighters who are trying to keep the entire Gironde from burning. So this is AGAIN a sign that all is well.

While we welcome all the good news, oil is at $97.60 and gas prices are falling, giving us even more confidence for next month’s CPI readings. As for gold, it is official, it has its own life, it is a living organism that works by itself and no longer according to the principle of supply and demand, but only according to its own desire to “go somewhere”. And it’s $1,713 sometime this morning. Bitcoin is worth $23,000 even though Tesla sold everything.

News of the day

In the news of the day, we welcome the ECB’s brilliant decision with plenty of bright conditions to show that things are under control. We also talk about the fact that in addition to selling books, Amazon will also take care of your health by buying One Medical for almost 4 billion, but there is also Japan, which is worried about military cooperation between China and Russia. But fear not, because MI6 boss ‘Q’, James Bond’s boss, has said that according to his information, Russia is running out of power in Ukraine and that the souffle will quickly dissipate. Probably slower than Germany to go into recession and have to ration gas for their friends in Europe, but that’s another story.

We’ll also note Las Vegas Sands, which rallied after the rotten numbers, and that Philip Morris also pushed hard because their figures were good. All the logic of the markets is gathered in one sentence. So SNAP is down 25% and everyone thinks it’s not only a bad app but a company of the same quality. Otherwise, Biden has COVID, but everyone doesn’t care because he’s been vaccinated 12 times and is pumped every morning by a defibrillator. There’s also the president of Italy who wants a snap election to offer a summer job to a politician who will be fired before Christmas anyway. In fact, Italy is the only country with a government that lives on less than a Kallax shelf from Ikea.

Numbers of the day

As for today’s numbers, we’ll have manufacturing PMIs and services PMIs all over the place, and then we’ll continue to look at the quarterly numbers and analyze them in terms of wind direction and weather. the age of the captain. In Switzerland we will have Lonza, Sika and Schindler. And then in the US, NextEra, Schlumberger, American Express and Twitter will appear to liven up this Friday, which already offers us a fall in futures. But it doesn’t have to last because as everyone knows, “the only way is up baby, especially if the CPI is less high”…

Happy Friday and a very, very good weekend. I’m off to the mountains to see if it’s cooler and I’ll find you in great shape on Monday and not on the dark side of the force.

See you on Monday!

Thomas Veillet
invest.h

“You only live once, and if you do it right, once is enough.” – Mae West