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China Markets the Good, the Bad & the Ugly

China Markets the Good, the Bad & the Ugly

The Good

Stimulus and a looser monetary policy help China to have a solid COVID-19 recovery with moderate inflation, much lower than the European and US nations. China's interest rate is on a long-term downtrend, which could create attractive opportunities for fixed-income investors.

China markets have extremely low valuations, just think that Hang Seng lost more than 50% from all time high, and its price is similar with the 1997 levels.

Valuations are attractive and they are poised for a rebound if China’s growth recovers.

China Hang Seng Chart

In a Twitter post, the hedge fund manager Michael Burry said:

“The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20 Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1.”

Most of the global investors are underexposed to China, while China's communist party makes efforts to access foreign capital markets. The Chinese economy represents approximately 18% of the global GDP, but China A-share market only comprises 1% of the global MSCI index.

China’s economy is green energy-efficient oriented.

Efforts in seeking to achieve carbon neutrality and energy reform have the potential to create additional investment opportunities, given China's leading position in wind and solar components and materials. China is a global leader in the renewable power industry and has established a clear policy commitment in support of climate transition and the protection of natural capital.

China is on track to meet its 33% electricity consumption target from renewables by 2025 and could comfortably exceed it amid ongoing efforts to debottleneck the power grid to accommodate more renewables, analysts and clean energy project developers said.

https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/energy-transition/092322-china-could-exceed-renewables-generation-target-of-33-by-2025

The Ugly Part

97% of Chinese provinces are spending more than they are receiving back in tax revenue.

The Chinese real estate market is in collapse. Real Estate Market was a major source of revenue for government few years ago. Land sale revenues are down 29% relative to last year while roughly 7.1 billion square feet of housing has been sold this year, the lowest amount since 2015.

China Budget freefall. Just check below the chart of Budget balance in relation with GDP.

China deficit percent of pib

Regarding the consequences, companies are fined for nonsense and illusive reasons because the China government look for ways to create cash flow through taxes and fines at the civilian level.

A vegetable vendor was fined 66,000 (9538 Euro)Yuan for selling subpar celery.

Source

http://global.chinadaily.com.cn/a/202208/30/WS630d561da310fd2b29e74de0.html

The Bad

Economic Growth for 2022 is revised down from 5.3% to 3.5%.

Taiwan Tensions with the US. War between Russia and Ukraine it’s catalyst for Chinese Communist party to invade Taiwan and that is a major concern for investors. Government bet that it will be difficult for US to economically sustain two fronts. Putin met with Xi Jinping multiple times before war with Ukraine. I personally don’t think China will invade Taiwan because the risk it’s simply too high for China.

Trade tensions & restrictions: The trade tensions and the tech war has expanded to semiconductors, as the US government imposed hard export restrictions on US chip technology.

Tech & Internet Collapse. All Chinese giant tech companies suffer from strong regulatory climate and difficult economically context.

China Tech Bubble Explode

Entrepreneurship and freedom of action for the technology market helped giants like Alibaba, Tencent or Baidu become what they are today, but last year’s climate was changed because of the US sanctions & government intervention.

Conclusion: Is China a buy?

Investment in China is very risky but is coming with huge opportunities, and we prefer small allocation of assets to Hang Seng and preferably just take high convictions stock like DQ (Daqo Energy).

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Is still the Energy Sector a Good Bet from Now in perspective of a Market Recessions and the Current Superbuble?

Is still the Energy Sector a Good Bet from Now in perspective of a Market Recessions and the Current Superbuble?

Energy sector it’s the best performing market sector in 2022 instead of the latest evolution of Oil. Evolution of energy sector its close correlated with war between Russia & Ukraine. But we need to recap last week’s events:

Russia shut down its Nord Stream 1 natural gas pipeline last week for “maintenance” and will thereby provide Europe with a preview of how will looks winter this year. Instead of opening terminal in Estonia from Norway and new delivery from Spain, or imports from Canada & Qatar Europe can’t replace completely Russian energy and Europeans will have higher bills for energy-related products. Its expected price caps but this will result in more shortage of Gas & Oil.

There is a growing possibility in the case of a regime change in Russia that could disrupt the crude oil and natural gas markets. We support this idea because of latest development of war, Ukrainian soldiers regain 6000 KM2. Also, six of Putin’s allies have been shot or blown up, so Putin’s inner circle is becoming increasingly isolated. “Special operation” support is lowering because of Europe sanctions from 85% to 68% according to Levada.ru.

Putin support in percent

In the event that there is a ceasefire between Russia and Ukraine, post-Putin, the stock market could explode 40% to the upside. However, as long as Putin remains in power, the Ukrainian war is expected to persist in a long, and we will have high price of energy. We reduce our profitable positions this week in anticipation of pervious scenario.
After last days of Ukrainian Army advance we can see already a turning point of conflict. Just take a look of yesterday map
Ukraina russia war map  

We closed some energy positions like Alvopetro (Alvof) with +40% and Petroleo Brasil (PBA) +30% opened in March because we had important gains from price appreciation and large dividends, with higher risk of president Jair Bolsonaro intervention in companies’ administration.
We anticipate Corporate Earnings to decline except Energy. We remain skeptical that a new Iranian nuclear deal will be announced in the upcoming weeks because this will affect Bidden administration and relationship between USA and Israel.

What About US Inflation

U.S. inflation may have peaked, but at high levels thus forcing the Fed to remain restrictive. Strong dollar, high mortgage rates, lower commodity prices, lower demand, and reduced supply chain pressures are likely to help reduce inflation over the next year. The U.S. dollar should stabilize over the medium-term amid hawkishness from other central banks and slowing economic data this is positive for growth stocks in short term. Right now, CPI was published and is above expected values but market overreacted this bad news. Today’s CPI report wasn’t a game changer. A “better balance” in the labor market would be a game changer for CPI next months because higher vacancies-to-unemployment ratio fuels inflation.

Just read Societe Generale opinion below:

Societe Generale Research discusses the USD outlook and sees the currency rally close to its peak. "Aggressive fiscal reaction to higher energy prices encourages our belief that while the euro and pound won’t stage significant rallies until the we’re closer to the end of the energy crisis (and the end of the war in Ukraine), the dollar’s peak isn’t very far away," SocGen notes. "A period of EUR/USD and GBP/USD trading in low ranges is more likely than fresh 10% fall from here and it’s much more likely the next 10% move in USD/JPY is down, rather than up, too," SocGen adds.

We can see at the end of the year decline in USD and we acquired new positions on Gold, Silver and Banks European Index (EXX1), also new positions in Citi (C) Societe Generale Bank (GLE).

Right now, we have a late cycle development and we prefer equities instead of fixed income like bonds. Not all equities are good to own right now, we select just strong companies with large cash flow from sectors like Healthcare, Consumer Samples and Utilities, Renewable Energy. We favor commodity and companies that mine uranium and lithium for green Energy Industry.

Good green Companies:

ENPH

Enphase Energy, Inc.

SEDG

SolarEdge Technologies, Inc.

VWS

Vestas Wind Systems A/S

PLUG

Plug Power Inc.

FSLR

First Solar, Inc.

ED

Consolidated Edison, Inc.

ORSTED

Orsted

RUN

Sunrun Inc.

EDP

EDP-Energias de Portugal SA

968

Xinyi Solar Holdings Ltd.

541450

Adani Green Energy Limited

9502

Chubu Electric Power Company,Incorporated

BE

Bloom Energy Corporation Class A

SGRE

Siemens Gamesa Renewable Energy, S.A.

DQ

Daqo New Energy Corp Sponsored ADR

 

Best Lithium Producers

Albemarle Corporation (NYSE:ALB:US)

Jiangxi Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460)

Lithium America Corp (LAC)

Sociedad Quimica y Minera S.A. (NYSE:SQM:US)

Allkem (ASX:AKE, OTC Pink:OROCF)

Some of the problems that markets will have to face in the near future:

  • Increased food and energy prices are causing acute trade imbalances and civil disorder in the most vulnerable countries. Europe will enter to recession.
  • China, COVID pandemic continues, massively affecting its economy. Simultaneously, the Chinese property complex – key to Chinese economic growth – is now under dire stress.
  • Greatest fiscal tightening in history as governments withdraw COVID stimulus will impact companies’ margins and profitability.
  • Population decline will pose threats to economic growths. No single G7 country’s is producing new born at replacement rate.
  • Climate problems, higher temperatures, on all continents will have a major impact for agriculture next years.

We see now all vectors for an epic super-bubble because all of the assets, stocks, bonds, houses are overvalued. Right now we experience first stages with inflation and interest’s rates surge but will have sooner than later lower corporate margins and unemployment.

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What are the Elites planning for the Future at Davos this year?

What are the Elites planning for the Future at Davos this year?

Few days ago, most influential people in the world (managers of Big Companies, top academics, leaders in main stream media, central bankers) are gathering to find paths to solve the issues on humanity crisis. Between 22 May and 26 May, Davos hosted World Economic Forum. Davos is an "invitation only" event for the "elite”. Davos it’s in essence a festivity of the ruling class. Here, the new macroeconomic trend will be set for this world, trend that will last for decades from now.

I’m not a big fan of conspiracies, but the discussions at Davos will become policies next years and we can check few strong examples:

  • “Zero interest rates policy”
  • “Mass people migration”
  • “The Abolition of Cash”
  • “Launching Electronic Currencies”

What is it about at Davos this year?

One of the main topics discussed was population migration between continents. Today, the main threat for the European Economies is the population decline, while the main issue for African continent is overpopulation & famine. Migrants coming to Europe today are not attracted by opportunities, like Golds Rush few centuries ago in US, but are attracted by: free medical services, free food for social cases, exceptional living expenses, Social Houses.

Food crisis that is coming in the next year because of the Russia conflicts with Ukraine, will determine a Mass Migration from Africa to Europe. Food shortage and how to solve this was the main topic discussed this year at Davos.

There was a massive surge of migrants to Europe in 2015. But that was just the beginning of what’s coming the next years. What we’re talking about here is the migration of millions of people of different languages, different races, different religions, different cultures, and different modes of living. Such a migration can only destroy the European culture and you can check the history back of what happened 1600 years ago in the Roman Empire, considering the migration of Germanic tribes.

A snapshot of food prices today, price are at all time high

corn futures price graph

I don’t want to beat the horses to much with people migration because other topics are also interesting, like MMT (Modern Monetary Theories). MMT means unlimited creation of paper cash to finance what governments want. This new modern economic theory must be implemented because Governments are bankrupted. Just check the US, UK, France, Spain balance sheets and debt to GDP ratio to understand how things are working now.

Countri list debt to gdp ratio

The Elite State (Davos participants) prefer to finance governments bail-out via inflation instead of imposing new taxes (it was the stock heaven in the last years).

For this reason, inflation is surging all around the Globe but they can hide this very well behind the conflict between Russia & Ukraine. Our countries economics problems are more profound than we think they are!

How to hedge against inflation?

Our options are:

  • Carbon Emissions Contracts
  • Precious Metals (good option right now)
  • Grains (too late)
  • REIT Stock’s
  • Energy Stocks (too late)
  • Other commodities like: Coffee, Cocoa, Sugar, Uranium

These days we find some options for stocks that are not in the sectors mentioned above and we want to bring you some examples here:

  • <DQ> DAQO NEW ENERGY CORP: Main producer of polysilicon to photovoltaic product manufactures in China. They have large clients in Europe, they also will open new factory in Mongolia, and the stock is extremely undervalued. 9 analysts revised their recommendations regarding this stock last month to upside.
  • <FSZ> Fiera Capital Corporation: The main investment Company in Canada that grow their AUM through acquisitions and offer 9% dividend yield.
  • <NRIM> Northrim BanCorp is the main bank in Alaska; we choose it because they have: low competition, 0 debts and Alaska will grow very much with the current Oil price.

Germany decision to stop Oil & Gas imports until the end of 2022 was in our opinion the main news at Davos and a BIG HIT to Russia. If Russia will not stop their “special operation” soon, we see this country evolving like the Nord Korea. India engagement to migrate on green energy is also a real big news that put a lot of pressure on China to change their policy also. India will change side to US-UK-EU alliance next years.

Job Market Evolution in years to come and how technology will change workers’ habits was also a good subject to meditate for the illuminated minds. Today, workers need to be more open to technologies, also work from home will be adopted by large companies. The main threat of productivity is the ability of workers to be self-organized, and discussions at Davos, was oriented on how to grow productivity in these new paradigm launched by COVID 19 disease.

Things are not going well and this was in agreement with all of the Davos participants, just to remind you some these week headlines:

  • UBS have cut their 2022 GDP forecast for China to 3% y/y, from 4.2%. Reminder, the official forecast out of China is for around 5.5%
  • JP Morgan downgrade China economic growth forecast, again. Project large contraction from -1.5% to -5.4%.
  • ECB President Lagarde has indicated July is likely lift off for rate hike
  • Fed's George says while inflation is clearly decelerating it could jump again

 

“With dedication to your freedom TopfxInvest”

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Germany will ban Russian Gas after drops opposition to embargo ?

The wall street Journal announced  yesterday that Germany will drop opposition to russian oil embargo https://www.wsj.com/articles/germany-drops-opposition-to-russian-oil-embargo-11651155915?mod=Searchresults_pos1&page=1

 

That will have a huge effect on oil prices.Oil will surge if the ban will be effective this year.After the news oil climbed from 95 to 105. 

Oil climb after Germany announce Russian Embargo

 

Would be interesting if the Russian refinery (Rosneft) will process oil from Arabia. The Germany Government threatened Rosneft with sanctions if it did not process oil from other sources.

 "Should Rosneft refuse to process non-Russian oil imports, Germany could put the refinery under state management under laws protecting strategic assets," (German ministry's) 

 

German economy min on yesterday brief: 

 "Higher inflation and slower growth is the price to support Ukraine"

  • Confirms reports of 2.2% GDP growth forecast this year and 2.5% in 2023 without embargo
  • Expects 6.1% inflation in 2022 and 2.8% in 2023

 

How much economic disruption are Europeans ready to tolerate for Ukrainian people ?

Euro is already at lowest levels against the US dollar 

EURUSD Chart 29-04-2022

 

The EU expects to remain dependent on imports of Russian gas for years (two three years at least). Russia’s move to halt gas flows to Poland followed Berlin’s decision to supply Ukraine with air-defense weaponry.  Russia will cut off Germany’s gas supplies if Berlin continues to ship arms. If supplies of gas were to be cut off tomorrow, Western European economies including Germany and Italy would face a severe energy deficit and a -2% on GDP. The economic effects would be catastrophic.

A sudden stop in the flows of Russian gas would mean industrial shut-downs and chains supply disruption because of economic shutdown. Southern European governments would demand more mutual EU debt issuance to relieve the economic pain. This is exactly what Germany has spent years trying to avoid. So, expect Berlin to do everything it can to keep Russia’s gas flowing in the near term, including dragging its feet over arms shipments to Ukraine, and paying for its gas in rubles, if that is what Moscow demands. Longer terms, Eu cut-off  russian gas, will be able to colapse & disintegrate Russia. War is already lost by Russian army, because you can't subjugate a free people and a country of the Ukraine dimensions with just 250K soldiers. When blitzkrieg is lost by Russia actually russian army lost the war.

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The Russia-Ukraine War will Dominate Markets this Week

The Russia-Ukraine War will Dominate Markets this Week

After high Inflation in US and Europe, the Covid-19 pandemic outbreak, a new event like war between two major countries affected the markets. War between Ukraine and Russia pushed this morning Gold over 2000$, Oil to 124$, Soybeans 1686$ and Corn to 775$. During war times precious metals, Oil and Grains perform well instead of risk assets like stocks.

Gold pop UP!US OIL POP UP

High level of sanctions from the Western Economies will destroy the Russian economy in the medium term. The Putin regime will fall in the near future because you can't win a war completely isolated from western world and you can't govern with terror and mass-media censorship.

According to the last Russian laws, you can get 15 years in jail if you transmit information from the battlefield that is not what the regime wants. All social media are closed, also internet websites like BBC, CNN, The Guardian etc. If the Putin regime it's not quickly removed, the Russian people will live like in the North Korea.

Also, some important brands like Toyota, Ford, BMW, Mercedes, VW, Oracle, SAP, Mazda, Nike, PayPal, Apple, IBM, DELL, Mitsubishi have closed the doors to the Putin regime. The Russian currency is moving down by over 30%, and the Moscow stock market is closed for three days in a row.

With the US & EU already facing the highest inflation in over four decades, triggered by the Covid lockdowns and restrictions, and the February CPI release this week anticipated to show an escalation during the previous month, the real possibility of an economic recession is even larger.

Therefore, the Federal Reserve's upcoming policy meeting on Mar. 15-16, will start a new interest rate hike cycle and it's not advisable to be exposed on the growth stocks. We still own high dividend stocks in the energy and finance sectors and also, we are keeping our Gold & Silver positions. We anticipate further weaknesses in stocks this month.

The United States and European allies are exploring banning imports of Russian oil, Blinken said on Sunday, and the White House coordinated with key Congressional committees moving forward with their own ban.

"A boycott would put enormous pressure on oil and gas supply that has already felt the impact of increasing demand. Prices are likely to rise in the short term, with a move toward $150 a barrel not out of the question Such a move will put further pressure on global economies, pushing inflation higher, leaving central banks debating how quickly rate hikes should be implemented." according to some analysts from CMC Markets.

"The war has clearly increased the risk of a stagflation scenario for the euro zone, where you will have a stagnating economy and much higher inflation on the back of high energy prices," said Carsten Brzeski, global head of macro at ING.

We stand with the Ukrainian people that fight for their freedom and we want to help mothers with children that are refugees. Right now, we are facing a real drama on the Ukrainian border as the refugee and their children are staying over three nights on -15°C without food and water.

It's estimated that there will be over 10 million refugees this year, if the conflict does not stop soon. 

ukrainian refugees

If you want to help refugees, you can donate on these links:

https://www.unicef.org.uk/donate/donate-now-to-protect-children-in-ukraine/ 

https://donation.dec.org.uk/ukraine-humanitarian-appeal

https://donate.unrefugees.org.uk/ukraine-emergency/~my-donation

https://donate.redcross.org.uk/appeal/ukraine-crisis-appeal

https://www.icrc.org/en/where-we-work/europe-central-asia/ukraine

https://www.savethechildren.org.uk/

https://donate.careinternational.org.uk/page/100263/donate/1?ea.tracking.id=e75_orgsocial

https://www.peopleinneed.net/

https://msf.org.uk/

https://donate.unhcr.org/int/en/ukraine-emergency

You can help Ukraine Army here:

https://savelife.in.ua/donate/        

https://www.portmone.com.ua/r3/uk/terminal/index/index/id/118103/

Слава Україні! (Slava Ukraini!)

Glory to Ukraine!

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Risk Tone is improving This week

Risk Tone is improving  This week

After the meeting between Putin and Macron, the markets have regained some losses from the first month of the year.

Macron: "Putin told me that he would not be behind any escalation in Ukraine". Instead, the meeting is not solving the problem between the Russia and Ukraine, but markets have anticipated a lower narrative tone in the future.

Putin Macron meeting

Better than expected, Atlanta FED GDP now rises to 0,7 from 0.1 also fuels a positive Risk tone.

Atlanta GDPNow forecast

Some good news from the inflation front announced by ECB Villeroy also helps stocks. Villeroy said:

 “Inflation hump should be temporary.

French inflation is to gradually diminish within a month.

I guarantee we will do what is needed for inflation to return to around 2% over time.”

Stocks are up SPX500 0,84%, NDQ 1,21% DJI +1% and VIX -5.67%.

Instead of some support in stocks, investors are concerned about the tightening announced in March from FED.

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Optimism didn't last on Markets after China lower Rates

Optimism didn't last on Markets after China lower Rates

SPX gave back the gains at the end of the day, because investors lost conviction that an early rally had legs. Risk-On sentiment didn't last after China decreased rates. Fears of inflation and higher interest rates in accordance with Geo-Political conflict between Ukraine & Russia have sent markets in red at end of the session.

Concern that the Federal Reserve will aggressively move to raise rates this year is a much more powerful catalyst than Chinese bank intervention and stocks Earnings. Investors have been concerned about rising rates because they raise borrowing costs and could dent global growth prospects and douse the earnings outlook for companies.

Analysts at ING said geopolitical risks, notably the possibility of Russia invading Ukraine, could continue to add to pressure on rising rates concerns.

Gold & Silver touched new highs lifted by worries surrounding inflation and Russia-Ukraine tensions. Gold 1,842 & Silver 24.63 gains were unexpected in the short term when bonds are up and Interest rates are expected to grow but geopolitical context is also an important catalyst.

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Markets Expectations for 2022 regarding Stocks, Gold, Oil and Commodities

Markets Expectations for 2022 regarding Stocks, Gold, Oil and Commodities

As we started a new year 2022, we want to present you our conclusions on markets and an analysis of our managed portfolio. In this article, we will analyse four major assets: Stocks, Gold, Oil and Commodities.

After stellar gains registered in 2021, in 2022 markets are expected to grow at a moderate peace, due to the rising risks.

We are bullish on Gold and Silver, and we are also confident on a future increasing in agricultural commodities, as we also presented in our article: https://topfxinvest.com/blog/we-anticipate-the-food-crisis-in-2022 

Now let’s take a look on some factors that can influence stock markets in 2022:

Bullish Factors:

  • The domestic economy is growing
  • Consumer spending overall is strong
  • Employment is expanding, and the unemployment rate fell to 4.1% from 4.2%.
  • Corporate earnings are growing by 27% (Apple it's $3 trillion company & Tesla deliveries grow by 87%)
  • Covid-19 Pandemic new variant Omicron is decreases in death rates

Bearish Factors:

  • Rising interest rates: FED official announced this week that they see this year three, instead of two interest rates increase
  • Some stocks are extremely overvalued, like FTNT (over 100%: yesterday we closed our position on FTNT) or MRNA. Also, almost 100 stocks from S&P500 index are up over 50%, which is too much in our opinion. If US interest rate will hit 5%, stocks will go down badly, similar to the 1987 crisis.
  • Continuing inflationary pressures because of transportations issues. We already discussed this topic in our article Shipping Congestions and higher prices will continue until ends of 2022 according to Morgan Stanley
  • Global tensions between Russia and US on Ukraine / Kazakhstan, also China and US on Taiwan, which are possible to extend into some major conflicts.
  • Covid-19 Omicron it's still here, and we cannot anticipate the implications of other virus mutations. If we have other lockdowns because of new pandemic outbreaks, stocks will be badly hit.

Other opinions regarding stocks:

JPMorgan Kolanovic says to buy the dip:

“Higher bond yields should not be disruptive for equities, but rather support our call for a growth to value rotation. […] We stay positive on equities and expect Omicron will ultimately prove a positive for risk assets, as this milder but more transmissible variant speeds the transition from pandemic to endemic with a lower human toll. As this wave fades, it will likely mark the end of the pandemic Omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity”.

On congested supply lines: “signs of supply constraints potentially passing their worst point”

BlackRock's largest fund asset has an optimistic view, but they raise concerns over China Covid19 policy: 

“The Fed has signalled three rate rises this year – more than we expected. Markets seem primed to equate higher rates as being negative for equities. We’ve seen this before and don’t agree. What really matters is that the Fed has kept signalling a low sum total of rate hikes, and that didn’t change last week. This historically muted response to inflation should keep real policy rates low, in our view, supporting equities.” 

“And not all spikes in long term yields are the same. Last week’s jump in U.S. Treasury yields was about the Fed signalling a readiness to start shrinking its balance sheet. This could result in a return of the term premium that investors typically demand for the risk of holding long-term bonds. This is not necessarily negative for risk assets as it can reflect an investor preference for equities over government bonds.”

Regarding China slows growth rate: “The key question is how China’s zero-COVID policy will stand up against Omicron. The policy so far has proven effective and enjoyed popular support, but has left China with almost no natural immunity. We expect the country to maintain the policy – at least optically – in this politically important year. This raises the spectre of more restrictions on activity, from targeted measures that keep the economy humming (Shanghai) to full-scale lockdowns (Xi’an). As a result, we believe downside risks to China’s growth have risen, even as Beijing appears bent on achieving its growth target this year by loosening policy.”

We think it's reasonable for Gold to push a higher price to 2500 after a huge stimulus amount, but it will happen only after the FED finishes raising the interest rates. Oil will slow down only after the inflation will also slow down, probably in the second part of the year according to Citi Bank Forecast 

We added to our portfolio some agricultural commodities and precious metals (Gold and Silver). and we sold some positions like: Tesla, Fortinet, Shopify, DocuSIgn, Disney, TradeDesk. In 2022 we plan to add more dividend stocks because we have a more neutral view on this year’s growth.

Further, I'm not a big fan of Crypto currencies. 40K for Bitcoin is a good price, but if it goes further under 30K, it's a good to buy and hold bet.

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We Anticipate a Food Crisis in 2022. How to protect your investments in case of a Food Crisis

We Anticipate a Food Crisis in 2022. How to protect your investments in case of a Food Crisis

The news about higher prices of food abounds in online stream media. Agricultural prices will go higher in 2022 and will have a significant impact on CPI. The main reason of higher agricultural prices in 2022 are Shortage of Fertilizers. Fertilizers prices have grown up this year because of the higher prices of gas and transportation disruptions.

Fertilizer shortage

Crops benefit more from fertilizer treatments in the early phases of the planting season. Delayed or missed application during the cycle will almost certainly result in lower yields, which tightens the food supply and drives the prices up.

Transportation disruptions because of Covid19 outbreak has affected also delivery of parts for agricultural machinery. Many farmers acquired some agricultural machinery components from over 1000 km distance. Farmers from Ukraine – the main corn producer in Europe – bought agricultural machinery parts from Austria or Germany with considerable time delays (over three months). Many farmers are purchasing parts in advance for safekeeping.

U.S. farmers appear pessimistic. Agricultural producer sentiment has started to decline in recent months. The sentiment for future conditions is now nearly as low as it was in the peak economic closure of the 2020 pandemic. Farmers have expressed concern over high input costs – i.e., fertilizer prices – weakening their operating margins.

farmer Sentiment 2021

We play this trade idea to buy Agricultural Funds like:

  • Invesco DB Agriculture Fund (DBA)
  • Elements Linked to the Rogers International Commodity Index — Agriculture Total Return ETN (RJA)
  • Teucrium Corn Fund (CORN)

For European traders, we have limited opportunities via Lyxor Commodities Refinitiv / CoreCommodity CRB EX-Energy TR UCITS ETF – Acc (CRN). Lyxor is a fund with over 56% exposure on agricultural products, and also precious metals (11.78%) and commodities stocks (11.35%).

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Phone call between Blinken & Chinese Foreign Minister Wang

US Secretary of State Blinken held a phone call with Chinese Foreign Minister Wang in which they discussed Afghanistan and US-China relations, while Wang stated that China will engage with the US based on its attitude towards China. In relevant news, it was also reported that a senior Pentagon official held a discussion last week with the Chinese military for the first time under the Biden administration.

China began a two-month campaign to crack down on commercial platforms and social media accounts that post finance-related information deemed harmful to its economy. Furthermore, WeChat, Douyin, Kuaishou and Sina Weibo will begin rectifying irregular practices involving publishing financial information on their platforms in response to the latest crackdown by Beijing.

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