POST-ELECTION BOND RALLY INCREASES NEGATIVE-YIELDING DEBT. The settlement of the U.S. election sparked a rally in the bond market, raising the global total of bonds carrying negative interest rates to a record $17.05 trillion, the Financial Times reported.
During the economic shutdown, governments and corporations issued a flurry of new bonds, including many in European and some Asian countries where interest rates are below zero.
Investors snapped up the new debt because of central banks’ promise to keep interest rates at or below zero and governments’ pledges to support economic recovery by any means necessary, the FT reported.
The volume of negative-yielding debt has more than doubled since March, according to the NYT.
TREND FORECAST: The run on bonds that cost money to hold to maturity indicates that investors are still seeking the safety of government and top-rated bonds to ride out short-term economic uncertainties. Thus, for those not willing to invest in losses, safe-haven assets such as gold and silver will continue to gain larger investment market share, which in turn will keep moving prices higher.
BITCOIN TOPS $15,000. As we have been forecasting when Bitcoin was trading in the $9,500 range, it had reached its bottom and would continue to rise higher. For the first time in almost three years, Bitcoin traded above $15,000 on 6 November, reaching $15,400 on 6 November. It is still trading in that range despite Monday’s sell-off when equity markets spiked on the vaccine news.
The current price is buoyed by a growing number of investors seeking high returns and comforted by the number of major players, such as hedge fund Renaissance Technologies, that are betting on Bitcoin.
Renaissance invested in BlockTower, a crypto hedge fund, and the results have outperformed the company’s Medallion fund, in which employees invest, said Renaissance co-founder Howard Morgan in a Financial Times interview.
Hedge funds focused on cryptocurrencies have returned a 63-percent gain to their investors this year through September, compared with a 3.2-percent yield from funds holding more conventional assets, according to data firm Eurekahedge.
TREND FORECAST: Minus wild cards, such as governments banning them, we forecast Bitcoin and other major cryptocurrencies will continue to rise in value as more investors, particularly younger generations, abandon national currencies that are being devalued as governments increase stimulus efforts and go deeper in debt.
NEW U.K. CLOSURES WILL COST RETAILERS $2.6 BILLION A WEEK. Britain’s new one-month partial economic shutdown will shrink the country’s retail economy by £2 billion, or about $2.6 billion, each week it is in force, the British Retail Consortium (BRC) told Forbes.com.
The lockdown is scheduled to end 2 December but could be extended.
The non-essential retailers affected by the order will lose the equivalent of $9 billion over the four weeks, while online sales will grow $3.9 billion above the same period last year, according to a model by Retail Economics.
Helen Dickinson, BRC’s CEO, called the shutdown the “nightmare before Christmas,” warning that it threatens the viability of thousands of small businesses and hundreds of thousands of jobs.
“The previous lockdown cost non-essential businesses £1.6 billion a week in lost sales,” she said in a statement announcing the BRC study’s results. “Now that we are entering the all-important Christmas shopping period, those losses are certain to be much bigger.”
The British government’s Scientific Advisory Group for Emergencies said the lockdown will have a “minimal impact” on the virus’s spread, the BRC’s statement noted, because of the “hundreds of millions of pounds retailers have spent making their stores COVID-safe and secure for customers and colleagues.”
TREND FORECAST: Ireland, Northern Ireland, Wales… along with many European nations, as we have reported, have imposed similar shutdowns. Clearly, the longer and harder the lockdowns, the more severe damage they will inflict on businesses, lives, and livelihoods… pushing nations deeper into the “Greatest Depression.”
BANK OF ENGLAND BOOSTS STIMULUS. With Britain entering a new, if modified, economic shutdown, the Bank of England (BOE) decided on 5 November to buy another £150 billion of government bonds, expanding its portfolio to £895 billion.
The bank also left its benchmark interest rate at 0.1 percent.
The central bank is Europe’s first to expand its stimulus plans since virus case numbers surged across the continent in recent weeks.
Because of the new shutdown, the bank now forecasts the U.K.’s economy will contract in the fourth quarter instead of expand.
The British government has said it will extend the program subsidizing wages for workers kept away from their jobs by the shutdown. Due to end on 31 December, the program now will continue through March.
The European Central Bank has signaled it will expand its stimulus program next month to blunt the economic impacts of new shutdowns. The plan includes a new round of bond-buying and cuts to interest rates for loans to banks.
Member nations have yet to approve the bank’s plan for £750 billion in stimulus for the Eurozone’s hardest-hit countries.
TRENDPOST: While central banks contend they have “fire power and ammunition” to boost equity markets and economies, we forecast that central banks have limited roles in rescuing nations’ economies and that governments will go deeper in debt in their attempts to boost growth.
NIKKEI CLOSES AT 19-YEAR RECORD HIGH. On 6 November, Japan’s Nikkei 225 stock index soared to a 29-year record high close as investors pulled out of speculative stocks and took refuge in blue chips such as Sony and Softbank.
The index’s rise to 24,325 was propelled largely by individual investors who leveraged their investments – essentially borrowing against expected profits – to buy more stocks than they could pay for in cash, Masatoshi Kikuchi, strategist at Mizuho Securities, told the Financial Times.
Japan’s individual investors have become more numerous and active during the economic shutdown, which kept many at home and in search of new interests.
The Nikkei’s stellar performance was not matched by the Topix index, which includes a broader range of companies. Although the Topix also gained during the week, it remains below February’s pre-pandemic level.
TRENDPOST: Market players were surprised that foreign investors largely sat out the bull run. Overseas investors also sold $2 billion worth of Japanese stocks during the week ended 31 October, indicating that those players did not see the September installation of Yoshihide Suga as Japan’s new prime minister as a signal the country’s economy would rebound soon.
It should be noted that Japan did not impose draconian lockdown rules as did most western nations, thus keeping businesses and enterprises running as normal.
To date, the nation of 123,335,804 million people has, since the COVID War began in February, lost just 1,829 people to the virus or 0.00148 percent of its total population.
Yet, as with Sweden and other nations that did not impose draconian lockdown rules, it is barely reported in the media or noted by politicians. Instead, they promote re-imposing stricter measures, which previously have failed.
DON’T COUNT ON CHINA, AUSTRALIA TELLS ITS EXPORTERS. Australian exporters should seek markets other than China, government officials told the country’s business community in a 5 November conference, after Chinese importers informally conveyed threats to ban Australia’s copper, lobster, wine, and other targeted goods.
China already has put punitive tariffs on Australian barley, restricted beef imports from down under, and launched an anti-dumping investigation into wine imports in response to Australia’s call for a probe of the origins of the COVID virus in the Chinese city of Wuhan.
Australia will “pay tremendously for its misjudgment” in colluding with the U.S. against China, the state-controlled China Daily newspaper warned in a 6 November editorial.
Trade relations between the two countries are unlikely to improve in the near future, Australian government officials told business executives at the conference, one of whom relayed details of the situation to the Financial Times.
Some exporters reported having their goods subjected to lengthy new health and safety inspections or otherwise delayed for unusual reasons. Beijing denies any organized effort to trouble Australian exporters.
Australian officials say their phone calls to Chinese counterparts to discuss the situation are not being returned.
With so much of Australia’s businesses tied to Chinese markets, finding substitutes any time soon will be difficult, executives told government representatives.
TRENDPOST: Talk is cheap, but the words of the Australian government will prove costly if they follow through on their threats. China is Australia’s largest trading partner; the two countries exchange Au$252 billion in goods and services each year, and Australia will not make up the loss trading with other nations.
AUSTRALIA’S CENTRAL BANK WILL BEGIN BUYING GOVERNMENT BONDS. On 3 November, the Reserve Bank of Australia and announced it will buy $100 billion worth of state and federal government bonds.
The purchases will keep government borrowing costs low to aid recovery from the economic shutdown. The purchases will go on for six months. Governments will be required to pay back the loans.
The bank also cut its benchmark interest rate from 0.25 percent to 0.1 percent. The action may lower mortgage rates, now averaging about 3 percent nationwide.
ARGENTINA NEARING ECONOMIC AND POLITICAL COLLAPSE.
The year-old administration of Argentine president Alberto Fernández was elected to haul the country out of a worsening economic recession.
So far, after trying several failed policies, he has been unable to. The failures have cost the government the trust of the public, economists say, according to the Wall Street Journal.
At the same time, a significant leftist coalition remains loyal to vice-president Cristina Kirchner, Fernández’ predecessor in the top office. Critics say her priority is to strengthen her political faction and protect herself from corruption investigations.
“There is complete lack of confidence in the management of the economy and that relates to uncertainty over who is really making economic policy,” Benjamin Gedan, Argentina expert at the Wilson Center, told the Journal.
After the country defaulted on its debt for the ninth time, Fernández restructured $65 billion in foreign-held bonds.
However, the economic crisis has continued, with foreign companies closing down and moving out and basic commodities scarce on store shelves.
With no economic reversal in sight, the country’s economy and government are nearing collapse, according to analysts.
Fernández blames the crisis on the policies of his predecessor.
TREND FORECAST: Argentina’s GDP will contract 12 percent this year, the International Monetary Fund has predicted. Already in the depths of the “Greatest Depression,” as the economy worsens, the nation will experience rising social unrest and political turmoil.
TURKEY’S TOP FINANCE EXECUTIVES ARE OUT. After Turkey’s president Recep Tayyip Erdoğan fired the governor of the country’s central bank on Saturday, finance and treasury minister Berat Albayrak submitted his resignation after two years in office, citing health reasons.
Albayrak, Erdoğan’s son-in-law, has been seen as one of the president’s chief allies in the government.
The shake-up worsens pressure on the lira, Turkey’s beleaguered currency, which has lost 30 percent of its value this year against the dollar and has bounced along a series of record lows in recent weeks.
During his two years guiding Turkey’s finances, Albayrak has been harshly criticized by opposition politicians, foreign investors, and members of his own political party.
Turkey’s foreign currency reserves are at their lowest level in 20 years, leading rating agency Moody’s to issue a warning in September that the country is increasingly likely to face a crisis in its balance of payments.
Raising interest rates would cool the country’s rampant inflation and shore up the lira, but Erdoğan has decried such a move as “the mother and father of all evils” and forced the bank to cut rates several times this year, attempting to energize a feeble economy.
Murat Uysal, the central bank governor just fired, had followed Erdoğan’s wishes but still was turfed out after only 16 months on the job.
“It is a bit surprising,” Turgut Kisinbay, Research Director at Invesco, told the Financial Times. “We are still scratching our heads to understand the trigger” for Uysal’s ouster.
Naci Agbal, the bank’s new governor, is a former finance minister who earned the regard of international investors while in that post.
Agbal is said to be one of the few people remaining in the Turkish government who adheres to mainstream economic thinking, including the idea that lower interest rates fuel inflation.
