If Bitcoin would be a stock…

…it would now rank amongst the 10 biggest companies in the world by market capitalization.

…with its current market cap of approx. $400bn, it is about the same size as VISA, which ranks #9 according to this list of the largest companies in Q3 2020.

…it would still be tiny compared to Apple, currently the largest company in the world, with a market cap of around $2,200bn – about 5 times the size of Bitcoin.

It is all about perspective.

YTD returns & market trends in June

Published on June 7, 2020.

YTD returns of major asset classes in 2020 so far:

YTD returns for major asset classes 2020.
YTD returns for major asset classes 2020.
Assetreturn [%]
Bitcoin (BTCUSD)39.68%
US 20+ YR Bonds (TLT)13.94%
US Tech stocks – Nasdaq 100 (NDX)10.73%
Gold9.99%
US 7-10 YR Bonds (IEF)8.16%
US Investment Grade Corporate Bonds (LQD)3.14%
US Dollar Index (DXY)0.16%
US stocks – S&P 500 (SPX)– 1.96%
Japanese stocks – Nikkei (NI225)– 3.35%
German stocks – DAX (DEU30)– 4.02%
Chinese stocks – Shanghai Composite (SHCOMP)– 5.00%
US REITs (VNQ)– 7.64%
Copper (XCUUSD)– 9.46%
US Small Caps (Russell 2000 – RUT)– 9.58%
UK stocks (FTSE 100 – UKX)– 14.73%
Indian stocks (India 50)– 16.52%
Commodities Index (CMOD)– 19.54%
Crude OIL WTI (US OIL)– 43.54%

YTD returns range from 39.68% for Bitcoin to -43.54% for Crude Oil. Bonds outperformed stocks. Gold outperformed stocks as well, only beaten by Tech stocks (Nasdaq 100). Large Caps outperformed Small Caps and Emerging Markets underperformed the US and Europe. Commodities are down considerably with the USD Dollar Index (DXY) flat for the year so far.

Market Trends

Inspired by Investor Puru Saxena, who is great follow on twitter, I use the 150 day exponential moving average (150 EMA) for the assessment of the general trend in financial markets.

up trend = price > 150 day EMA
down trend = price < 150 day EMA

Trend in most stock markets is up. The UK and Hong Kong are still in downtrends.

The trend in Gold, Silver, Bitcoin, Ethereum, EURUSD, GBPUSD is up. The trend in the US Dollar Index (DXY) is down.

The trend in Commodities (CMOD), Oil (WTI) is still down, whereas the trend in Copper just turned to the upside.

Copper has turned above its 150 day moving average.
Trend in Copper is now up – June 7, 2020.

The end of growth?

Published on June 3, 2020.

Our economic and financial system is made for growth. It is addicted to ever more debt to fuel growth. As demographics turn or already have turned in all Western countries from Japan, Europe to the United States, where will growth come from? – Ever more consumption from less or older people?

It is definitely something to think about right now, as global economic activity came to a halt due to the Corona pandemic. When this crisis is over, will growth in the United States just resume or might the US catch up to Japan and Europe which have experienced no or rather low growth for quite a while? Look at the stock markets in the US, Europe and Japan below, it is remarkable.

S&P 500 (SPX), Eurostoxx 50 (SX5E) & Nikkei since 1989

In a recent podcast, Adam Robinson convincingly argued that the US may be headed towards the European and Japanese path, at least in the broader economy. For sure they still have the big tech monopolies dominating the internet and benefiting from continued growth. However, investors may may have to select more carefully for the winners and sort out the losers in the future.

Emerging markets as the last frontier?

Emerging markets, which are also among the cheapest markets globally (see for example the Global Value portfolio), still experience both population growth and growth in consumer spending, as they have a growing middle class. But they also face problems, as some markets depend on industrial commodities, not ideal in a deflationary world. Others depend heavily on exports of consumer goods to western economies or have debt denominated in foreign currency, such as US-Dollars. This could cause them trouble should the Dollar strengthen further. However, some countries especially in Southeast Asia, like Vietnam, should have a positive economic outlook at least relative to other countries around the world.

How to position yourself for low to no growth

What has worked in the past can still work in the future. But when we consider the past, most of us think about the last 10 to 20 years and not much further back. For investors, the 1970s with high inflation and low growth (Stagflation) in many parts of the world, seem very distant. Especially as the last 40 years were marked by ever lower interest rates, medium to high growth, rising asset prices and low inflation.

The “Dragon Portfolio” may work well in any environment

Chris Cole from Artemis Capital Management argues that these days most investment managers are just too young to have experienced a different investment environment like the 1970s. So in his interesting paper “The hawk and the serpent” (Link to Artemis PDF Download, you can also watch a great interview with Chris Cole on a Recession proof portfolio) he looked back 100 years with the intention to create a portfolio that will work in any investment environment. A very different approach than the classic 60/40 Equities/Bonds portfolio, which has performed extraordinary well in the last 40 years but not so well in times of high inflation or deflation, like the 1970s or 1930s. The so called Dragon portfolio worked extremely well in any environment, whether inflationary, deflationary, low growth or high growth. George Gammon did a great video on the Dragon portfolio, definitely worth watching. The construction of a Dragon-like portfolio for retail investors will be discussed in a follow-up post on this blog.

Trend Analysis – week 1, March 2020.

Published on March 8, 2020.

With fast moving markets, a quick update of current trends. Our trend model:

up trend = price > 40 week average (SMA 40)
down trend = price < SMA 40

The market timing status is characterized by another simple metric:

buy = recent 4-week-Exponential Moving Average (EMA 4) cross above SMA 40 (within the last 2 weeks)
sell = recent EMA 4 cross below SMA 40 (within the last 2 weeks)
hold = wait for next buy or sell signal

Global stock markets

After the sell-off end of February, the markets saw a turbulent first week of March. Weekly sell signals are recorded on all major indices, except for the Nasdaq 100 and the Shangai Composite, which are still holding their uptrend above the 200 day moving average.

markettrendtiming
S&P 500 – SPXdownhold (sell)
Nasdaq100 – NDXuphold
Russell 2000 – RUTdownsell
Germany – DAXdownsell
UK – FTSE100downsell
Europe – Eurostoxx50 – ESTX50downsell
Japan – Nikkeidownsell
China – Shanghai Compositeuphold
HK – Hang Sengdownsell

Stock market to watch: S&P 500 – SPX

SPX bounced and retested its 40 week moving average. The weekly close below is bearish and a sell signal very close.

SPX 40 week moving average retest
SPX 40 week moving average retest

Global bond markets

Long-term US Treasury bonds are going parabolic now. As I have pointed out with REITs a few weeks ago, such moves are normally not sustainable and are followed at least by some mean reversion. Let’s see how bonds react when the stock market starts to calm down.

Euro corporate bonds are right at their 40 week moving averages, very close to a new downtrend.

TLT going parabolic - March 8, 2020.
TLT going parabolic – March 8, 2020.
markettrend timing
US 10 year GOVT bonds (IEF)uphold
ishares Investment Grade Corp Bond ETF (LQD)uphold
US 20 year+ GOVT bonds (TLT)uphold
Vanguard Eurozone ETF (VETY)uphold
US Treasury bonds ETF (VUTY)uphold
BIV Vanguard Intermediate Term bonds ETF (BIV)uphold
Vanguard Emerging Markets bonds ETF (VDET)uphold
Vanguard Extended Duration bonds ETF (EDV)uphold
Vanguard Euro Corporate bonds (VECP)uphold (sell)
ishares Inflation Link Govt Bond (IBC1)uphold

Bond ETF to watch: VECP

The Vanguard VECP EUR Corporate Bond ETF bounced and managed to close above its 40 week moving average again. However, watch out for a weekly sell signal if we see further weakness in the coming week.

VECP Vanguard EUR Corporate Bond - March 8, 2020.
VECP Vanguard EUR Corporate Bond – March 8, 2020.

Commodities & Metals

Commodities took a hit again last week, heading sharply lower. WTI Crude Oil closed the week at 41.50 USD, its lowest weekly close since August 2016. Silver managed to reverse and is holding above its 40 week moving average for now.

market trend timing
Invesco DB Commodities Index (DBC)downhold
Crude OILdownhold
GOLDuphold
SILVERuphold
COPPERdownhold

Precious metal to watch: Silver

No weekly sell signal has been generated in Silver yet.

Silver weekly chart - March 8, 2020.
Silver weekly chart – March 8, 2020.

Forex & Crypto Markets

The Euro shot up above its 40 week moving average against the US-Dollar last week and is ripe for weekly buy signal. BTCUSD has recorded a weekly sell signal by a tiny margin.

market trend timing
EURUSDuphold (buy)
GBPUSDuphold
USDCADupbuy
AUDUSDdownhold
BTCUSDdownsell (hold)
ETHUSDuphold
XRPUSDdownhold

Currency pair to watch: EURUSD

The Euro showed a strong move up last week and a weekly buy signal is highly likely in the coming week.

EURUSD weekly chart - March 8, 2020.
EURUSD weekly chart – March 8, 2020.

Crypto asset to watch: Bitcoin

BTCUSD has been hovering around its 40 week moving average for a while – first on a failed buy, now on a sell signal by a very tiny margin. So technically the downside seems more likely right now. However, with Bitcoins’ volatility this can go either way fast for a bigger move. Interesting position from a reward-to-risk perspective, whether you prefer the downside or the upside.

BTCUSD not really decided yet - up or down?
BTCUSD weekly chart – March 8, 2020.

Real Estate (REITs)

Whereas US REITs (VNQ) bounced back from the lows a bit, European REITs are basically sitting at their lows from February 28, right above the 40 week moving average.

market trend action
US – VNQdownhold
Europe – XDERuphold

REIT to watch: VNQ

VNQ bounced back from the lows last week and hasn’t recorded a weekly buy signal yet, but it is highly likely next week, if there is no significant price increase above the 40 week average.

VNQ weekly chart - March 8, 2020.
VNQ weekly chart – March 8, 2020.

Trend Analysis March 1, 2020

Published on March 1, 2020.

Two months of 2020 are in and this year had an intense start. Let’s see where we are in our trend analysis. The trend assessment below is based on the simple binary metric:

up trend = price > 40 week average (SMA 40)
down trend = price < SMA 40

The market timing status is characterized by another simple metric:

buy = recent 4-week-Exponential Moving Average (EMA 4) cross above SMA 40 (within the last 2 weeks)
sell = recent EMA 4 cross below SMA 40 (within the last 2 weeks)
hold = wait for next buy or sell signal

Global stock markets

Stock markets around the globe broke down sharply from their highs over the last two weeks and are mostly below their 40 week or 200 day moving averages now. The Coronavirus panic was the trigger. We pointed out underlying relative weakness in some markets in our Mid-February report, which has resolved to the downside for now, with new downtrends across major indices. Weekly sell signals are recorded on the FTSE100 and again the Hang Seng Index, which has been trendless for a while. The Nasdaq 100 is the last man standing, still holding its uptrend above the 200 day moving average.

markettrendtiming
S&P 500 – SPXdownhold
Nasdaq100 – NDXuphold
Russell 2000 – RUTdownhold
Germany – DAXdownhold
UK – FTSE100downsell
Europe – Eurostoxx50 – ESTX50downhold
Japan – Nikkeidownhold
China – Shanghai Compositedownhold
HK – Hang Sengdownsell

Stock market to watch: S&P 500 – SPX

The SPX closed below its 40 week average and is in downtrend mode right now. So far no weekly sell signal has been triggered so next week will be crucial – as in all global stock markets, which are in a more or less similar situation.

SPX weekly chart - Mar 1, 2020.
SPX weekly chart – Mar 1, 2020.

Global bond markets

Global souvereign bonds are in even stronger uptrends than two weeks ago, acting as safe haven right now. Corporate bonds not so much, flirting with a new downtrend.

markettrend timing
US 10 year GOVT bonds (IEF)uphold
US 20 year+ GOVT bonds (TLT)uphold
Vanguard Eurozone ETF (VETY)uphold
US Treasury bonds ETF (VUTY)uphold
BIV Vanguard Intermediate Term bonds ETF (BIV)uphold
Vanguard Emerging Markets bonds ETF (VDET)uphold
Vanguard Extended Duration bonds ETF (EDV)uphold
Vanguard Euro Corporate bonds (VECP)uphold
ishares Inflation Link Govt Bond (IBC1)uphold

Bond ETF to watch: VECP

The Vanguard VECP EUR Corporate Bond ETF closed the week right at its 40 week moving average after a deep look below during the week. Watch out for a break next week and a potential weekly sell signal.

VECP weekly chart - March 1, 2020.
VECP weekly chart – March 1, 2020.

Commodities & Metals

Commodities accelerated their downtrends with Silver joining the crowd.

market trend timing
Invesco DB Commodities Index (DBC)downhold
Crude OILdownhold
GOLDuphold
SILVERdownhold
COPPERdownhold

Precious metal to watch: Silver

Silver got caught in the liquidation mania end of February and closed the month below its 40 week moving average for a new downtrend. A weekly sell signal is close but not realized yet.

Silver weekly chart - March 1, 2020.
Silver weekly chart – March 1, 2020.

Forex & Crypto Markets

No fundamental changes in major currencies but the Euro is bouncing back a bit (see below). In Crypto land, Bitcoin and XRP reversed down whereas Ethereum is holding its uptrend.

market trend timing
EURUSDdownhold
GBPUSDuphold
USDCADupbuy
AUDUSDdownhold
BTCUSDdownhold (sell)
ETHUSDuphold
XRPUSDdownhold

Currency pair to watch: EURUSD

The Euro bounced back from the lows near 1.08 quite strongly, trying to test the 40 week moving average again. Watch out for a potential new uptrend and weekly buy signal above 1.11 in the coming weeks.

EURUSD weekly chart – March 1, 2020.

Crypto asset to watch: Bitcoin

BTCUSD is back down below its 40 week moving average. No sell signal has been generated yet. Watch out for a potential weekly sell signal. A buying opportunity is also in the cards if the sell signal does not materialize.

BTCUSD weekly chart - March 1, 2020.
BTCUSD weekly chart – March 1, 2020.

Real Estate (REITs)

Both US REITs (VNQ) and European REITs broke down sharply at the end of February along with the stock market. Whereas VNQ is on downtrend already, XDER is sitting close its 40 week moving average.

market trend action
US – VNQdownhold
Europe – XDERuphold

REIT to watch: VNQ

VNQ is in a technical downtrend, no weekly sell signal has been recorded yet.

VNQ weekly chart - March 1, 2020.
VNQ weekly chart – March 1, 2020.