Taking advantage while the bear’s in retreat

Thursday, 21 February 2019
Adelaide, Australia
By Bernd Struben

  • ‘Get it while you still can’
  • ‘“Open-and-Closed-Case”: Trump Rubbishes Border Wall Suit’

Don’t be surprised when a crack in the ice appears under your feet.’

Pink Floyd, The Wall

We’ve marched to a bullish tune this week.

And for good reasons.

The bear market that threatened to claw back hundreds of billions of investor dollars, at the tail end of 2018 and into early 2019, is in full retreat.

You can thank growing optimism over a resolution of the US–China trade dispute for that. And company earnings reports that are, on balance, mostly meeting expectations.

While you’re at it, don’t forget to thank the US Federal Reserve. Not to mention the world’s other major central banks (RBA, PBoC, ECB, BoJ…).

Reporting on the minutes of the US Fed’s January meeting, the AFR notes:

Federal Reserve officials widely favoured ending the runoff of the central bank’s balance sheet this year while expressing uncertainty over whether they would raise interest rates again in 2019…’

Watching stocks tumble and global growth indicators slow, the world’s biggest central banks have all taken a dovish turn. And there’s nothing like cheap, easy money to hearten investors and buoy the markets.

This presents investors with some promising opportunities. We’ll get back to the opportunities below.

But first, a note of caution.

While the bear may have gone into hiding, you shouldn’t expect a multi-year hibernation.

Here in Australia, there are plenty of warning signs flashing. Sinking housing prices lead the charge.

As you likely know, house prices are down 12% on average in Sydney over the past year and some 9% in Melbourne. And they’re still falling.

If that’s not gloomy enough, an increasing number of homeowners are having problems meeting their debt obligations. From The Sydney Morning Herald:

Figures from ratings agency S&P Global showed the number of people falling behind on securitised mortgages – supplied by a small number of largely non-bank lenders – was climbing.

The number of mortgages at least 90 days in arrears reached a record level of 0.75 per cent in December.’

In their last meeting on 5 February, the RBA board expressed concern about the potential impact of falling property prices on consumer spending. The board’s minutes note the knock-on effect this could have on employment and GDP. Hence the odds of a rate cut have gone up while any interest rate rise in 2019 looks highly unlikely.

To get an idea of the knock-on effects already being felt, look no further than Australian building products suppliers.

From the AFR:

Fletcher Building chief executive Ross Taylor says the speed of the Australian housing market downturn has been much faster than the company had been expecting, prompting an escalation in the already fierce competition among building products suppliers all chasing sales in a shrinking market…

Fletcher, which is dual-listed in New Zealand and Australia, suffered a 38 per cent slide in earnings before interest and tax to $NZ53 million in the first half of 2018-19 in its Australian arm.

Stagnant wages aren’t helping the picture either.

The latest figures from the Australian Bureau of Statistics show that nationally wages grew by a meagre 2.3%. That’s before taking into account an inflation rate of 1.8%.

We’ll leave the gloom at that for today. A healthy reminder that all is not well beneath the frothy markets.

Which is not to say there aren’t some smashing opportunities out there for savvy investors.

We’ll look at one of those right after the markets.

Markets

Overnight, the Dow Jones Industrial Average closed up 63.12 points, or 0.24%.

The S&P 500 gained 4.94 points, or 0.18%

In Europe, the Euro Stoxx 50 index finished up 20.08 points, or 0.62%. Meanwhile, the FTSE 100 climbed 0.69%, and Germany’s DAX closed up 92.76 points, or 0.82%.

In Asian markets, Japan’s Nikkei 225 is down 28.80 points, or 0.13%. China’s CSI 300 is up 0.53%.

In Australia, the S&P/ASX 200 is up 50.51 points, or 0.83%.

On the commodities markets, West Texas Intermediate crude oil is US$56.92 per barrel. Brent crude is US$67.08 per barrel.

Turning to gold, the yellow metal is trading for US$1,340.22 (AU$1,869.73) per troy ounce. Silver is US$16.08 (AU$22.43) per troy ounce.

One bitcoin is worth US$3,924.80. (More on bitcoin below…)

The Aussie dollar is worth 71.68 US cents.

‘Get it while you still can’

Major global stock markets and most hard commodities have all trended higher since early January. And with a spot of help from the world’s friendly central bankers, their midterm outlook remains strong.

Existing largely outside the grasp of central banks, the outlook for cryptocurrencies is harder to predict.

As you can see in the year-to-date chart for bitcoin below, the world’s biggest crypto by market value took a tumble on 10 January. Bitcoin didn’t lock in its recovery until 8 February, when it reached a low of US$3,356.

Since then it’s gained about 17%. Not bad in two weeks’ time.



chart image

Source: CoinDesk
Click to enlarge

A quick scan of the past two days’ headlines over at CoinDesk reveals that their crypto pundits are turning bullish.

‘Bitcoin Price Crosses Key Long-Term Hurdle For First Time in 4 Months’, reads one. The article is referring to bitcoin passing through its 100 day moving average (MA). If you have faith in technical analysis of the crypto markets — I don’t — this could be a buy signal.

‘Funds in Short Positions on Bitcoin Drop to 6-Month Low’ reads another headline. That one’s pretty self-explanatory.

And here’s a third bullish headline, ‘Bitcoin Price Looks North As Trading Volumes Hit 9-Month Highs’. The article notes that:

‘[T]otal trading volumes across all exchanges jumped 40 percent to $9.91 billion on Monday, validating BTC’s bullish breakout above $3,800. Further, investor interest in the cryptocurrency has increased post-breakout, with volumes rising further to $9.93 billion yesterday – the highest level since May 3, 2018.

That sounds very promising.

But when it comes to all things crypto, there are only a few experts I listen to. Namely Sam Volkering and Ryan Dinse, co-editors of the introductory advisory service, Secret Crypto Network.

I asked them their thoughts on a pending bitcoin rebound. Here’s what Sam emailed me this morning:

This is a similar pattern to what we saw during the last boom-bust back in 2013/14. We saw it again in the lead into 2016/17. We’re approaching the next bitcoin halvening in 2020, just over a year away now.

A halvening is when the bitcoin (BTC) miner’s reward is halved. In 2020 it will fall to 6.25 BTC for mining a block. That could see BTC exceed what we saw in 2017 and early 2018. I expect values to creep higher over the next year and then…boom!…they’ll be off again from the next halvening.

So get it while you still can.

You also need to remember owning whole BTC will be rare. With just under 21 million BTC to ever exist, they’ll continue to be scarcer every day. Add in the fact that millions are lost or stuck in inaccessible accounts. So in reality it’s more like there will only ever be 15-17 million BTC in existence, with even less in circulation.

Luckily 1 BTC is divisible into 10,000,000 Satoshi (often referred to as Sat). In the near future it will be normal to own Sats but rare to own whole BTC. The chance to be a whole BTC owner will be limited.

I believe demand will continue to rise and supply won’t even come close to matching it. Now could be one of the few realistic chances you have to get and own a whole bitcoin before their value in fiat money becomes virtually inaccessible.’

Now that’s the kind of useful advice you can do something with…if you wish.

If you have another look at the recent headlines from CoinDesk (no offense to them), those are all based on backward looking analysis — moving averages, trading volumes, short positions…

What we want is a glimpse into the future.

And if Sam’s right, the future for bitcoin is looking very bright indeed.

To keep up with all of Sam and Ryan’s cryptocurrency insights and investment advice, have a look at what they’re doing over at Secret Crypto Network.

Just click here.

Finally, here’s the latest from The Australian Tribune:

‘“Open-and-Closed-Case”: Trump Rubbishes Border Wall Suit’

To wall or not to wall? That’s no question for US President Donald Trump.

One of his signature campaign promises was to build an effective wall between the US and Mexico. And two years into his presidency, Trump’s pulled out all stops to see that through.

As you’d expect his opponents are…

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd