Archive for Opinions – Page 61

13 Feb

Could Market Bubble Lead To a New Gold Bull Market?

Source: Streetwise Reports  (2/12/24)

Could another bubble burst like the “Dotcom Bubble,” which helped usher in a decade-long gold bull market with extraordinary gains, be on its way? Surprisingly, some analysts and experts say there are similarities between then and now.

Could another bubble burst like the “Dotcom Bubble,” which helped usher in a decade-long gold bull market with extraordinary gains, be on its way?

Hussman Investment Trust President John Hussman, who predicted the Dotcom Bubble break and the market downturn in 2008, is warning that another fallout is coming soon.

“We estimate that current market conditions now ‘cluster’ among the worst 0.1% instances in history — more similar to major market peaks and dissimilar to major market lows than 99.9% of all post-war periods,” Business Insider quoted Hussman as saying in a recent note.

Hussman said other such instances, including the Dotcom Bubble, are usually followed by an “abrupt” drop in the stock market.

For the savvy gold investor, that may be a big opportunity — like the big growth gold saw in the 2000s after the Dotcom Bubble burst.

“The Fed started to cut the federal funds rate in the response, gold started its impressive rally,” according to GoldPriceForecast.com. “Many people did not want to invest in the stock market anymore, and they switched into the housing market (developing another speculative mania) and into . . . the precious metals market. The low-interest rates, weak greenback, and unsound U.S. fiscal policy made gold shine.”

A team of J.P. Morgan analysts led by Khuram Chaudhry noted, “Rising concentration in the U.S. stock market has become an important risk that investors should be aware of in 2024.”

On his website, Addicted to Profits, David Skarica also saw similarities with earlier gold markets and predicted the metal will rise in value “sometime this year.”

Chaudhry and his team said there are differences between the Dotcom Bubble era and now, but the two are “more similar than one might initially expect.”

“When viewed in a historical context, parallels to the ‘Dotcom Bubble’ era are often dismissed due to the ‘irrational exuberance’ that characterized this period. In this note, we demonstrate that there are a plethora of similarities between these two periods,” said the note, reported on by MarketWatch.

And when it happens, investors should be ready, noted wealth advisor Ross Goldstein, who wrote that gold breaking records is a “rare and remarkable occurrence, given its historical long-term stability over thousands of years. The last time such groundbreaking price movements occurred was in the 1970s and the 2000s . . . The second gold bull market from 2000 to 2011 (after the Dotcom Bubble) exhibited almost an 8X rise.”

According to Katusa Research, heightened uncertainty and decreased appetite for risk could send investors to gold. Also, a hard landing for the economy would justify more Fed rate cuts, “fanning the flames for higher gold prices.”

“You need to be prepared,” the site said. “If a roaring bull market sends the gold price above (US)$2,200 for any period of time, look out.”

From Tulips to Blue Chips

According to Investopedia, an asset bubble happens “when the price of a financial asset or commodity rises to levels that are well above either historical norms, the asset’s intrinsic value, or both.”

Global analyst Adrian Day, writing for Streetwise Reports last month, said gold’s “time has come.”

Such bubbles are not new. One of the earliest recorded happened in Holland during the 1630s, when “Tulipmania” hit the country. Speculation drove the value of tulip bulbs to extremes.

“At the market’s peak, the rarest tulip bulbs traded for as much as six times the average person’s annual salary,” Investopedia said.

By the end of 1637, the tulip bubble burst when buyers could not pay the high prices, and the market fell apart.

There were other bubbles in the 1700s (over a company formed to trade with South American Spanish colonies) and the 1980s (fueled by “overly stimulative monetary policy).

The Dotcom Bubble

However, for increased scale and size, few matched the Dotcom Bubble.

“The increasing popularity of the Internet triggered a massive wave of speculation in ‘new economy’ businesses,” Investopedia said. “As a result, hundreds of dot-com companies achieved multi-billion dollar valuations as soon as they went public.”

The NASDAQ soared from about 750 in 1990 to a peak of more than 5,000 in March 2000. The index then crashed by 78% by October 2002, not reaching a new high until 2015.

Investors asked, “Do you have a ‘.com’ suffix in your name? If yes, we will invest in you,” according to GoldPriceForecast.com. “No matter that, you never made any money. You have to gain in value, anyway!”

Stock values grew, but capital dried up.

“In the years preceding the bubble, record-low interest rates, the adoption of the Internet, and interest in technology companies allowed capital to flow freely, especially to startup companies that had no track record of success,” Investopedia said. “Valuations rose, and money eventually dried up. This led companies, many of which didn’t even have a business plan or product, to collapse, causing the market to crash.”

The Golden Years

However, the bear markets that come after such falls “are exactly what precious metals investors are prepared for,” noted RME Gold.

“In a bear market, stockholders tend to sell off their stocks as values are declining, so they don’t lose more money,” the site said. “At this time, to balance their portfolios, they’ll turn to gold and silver as safe assets for protection. Historically, when the market goes down, the price of gold goes up. This ‘see-saw’ effect is evident in the surge in gold prices when the economy was deep in recession after the subprime mortgage crisis of 2008. Even in a bear market for stocks and indexes, gold and silver may experience an increase in value.”

Not only did the Dotcom Bubble burst, but America suffered one of the largest terrorist attacks in history on Sept. 11, 2001, and the price of gold rose steadily. The global economic crisis that shook the markets in 2008 also boosted the price.

From August 1999 to August 2011, gold rose from US$394 an ounce to US$2,066 an ounce, an increase of more than 425% over 145 months (in terms adjusted for inflation), Tavex reported.

How High Will It Go?

Investors often turn to precious metals as a hedge against inflation or during geopolitical instability and market uncertainty. Russ Koesterich, writing for BlackRock, said gold is “an imperfect hedge, but still a Buy.”

“Even under a good outcome, investors are looking at a prolonged period of uncertainty” right now, he wrote. “This scenario, combined with negative real rates, should keep gold moving higher.”

In a research note reported by CNBC, UBS noted that when it comes, the “power of the [Federal Reserve’s] policy pivot should not be underestimated.”

Still, UBS forecasted a rise to US$2,250 per ounce for gold by the end of the year. It was US$2.024.20 Friday afternoon.

In the longer term, a model by Incrementum assigning probabilities to future gold prices “currently shows a 75% chance of (US)$3,000+ by 2030,” John Rubino of John Rubino’s Substack noted.

Gold’s ‘Time Has Come’

Chaudry and his team at J.P. Morgan have determined that the number of sectors in the top 10 most valuable companies is actually less diverse than during the Dotcom Bubble, MarketWatch reported.

“Back then, there were six sectors represented among the Top 10 stocks, compared with just four today,” MarketWatch noted. “What’s more, they found that during both periods, information-technology companies represented the biggest share of the group’s total market capitalization.”

The analysts said the overall share of earnings-per-share growth contributed to the ten largest stocks was actually higher during the Dotcom Bubble, rebutting the conventional wisdom that stocks at the time had become completely disconnected from fundamentals.

“While we would be hesitant to refer to the current levels of the Top 10 as a bubble, it would certainly appear that the Top 10 in the Dotcom era was backed by superior earnings developments,” the J.P. Morgan team said.

Hussman, who predicted the 2000 and 2008 market slumps, stands by his belief that another downturn is coming and “could be even steeper this time.”

“Without making forecasts, it’s fair to say that we would not be surprised by a near-term market loss on the order of 10% or more in the S&P 500, nor would we be surprised by a full-cycle market loss on the order to 50-65%, nor a US recession that the consensus seems to have ruled out,” Hussman said.

On his website, Addicted to Profits, David Skarica also saw similarities with earlier gold markets and predicted the metal will rise in value “sometime this year.”

“The closer we inch to seeing those rate cuts finally happen, the gold can finally see that breakout,” he said.

Global analyst Adrian Day, writing for Streetwise Reports last month, said gold’s “time has come.”

“For nearly two years, we have been saying that gold will take off when the market believes that the Fed will change course on tightening before inflation is vanquished,” he wrote. “We are at that point now. The Fed’s pivot comes with the Fed’s own preferred inflation measure at 60% above its own target. It is monetary factors, not geo-political, that will see a sustained move higher in gold.”

 

Important Disclosures:

  1. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
  2.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

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Metals Opinions
13 Feb

Driving the best possible bargain now isn’t the best long-term strategy, according to game theory

By Kate Vitasek, University of Tennessee 

Conventional wisdom says that you should never leave money on the table when negotiating. But research in my field suggests this could be exactly the wrong approach.

There’s mounting evidence that a short-term win at the bargaining table can mean a loss in terms of overall trust and cooperation. That can leave everyone – including the “winner” – worse off.

As a former executive, I’ve managed large contracts as both a buyer and a seller. Now, as a business professor, I study these trading partner relationships, exploring what works in practice. My work supports what economic theorists and social scientists have been arguing for years: The best results come when people collaborate to create long-term value instead of fighting for short-term wins.

What game are you playing?

Research into art, science and practice of collaborative approaches dates back to the 1940s when the mathematician John von Neumann and economist Oskar Morgenstern used mathematical analysis to model competition and cooperation in living things.

Interest in collaborative approaches grew when researchers John Nash, John C. Harsanyi and Reinhard Selten won a Nobel Memorial Prize in Economic Sciences in 1994. Their work inspired academics around the world to delve deeper into what’s known as game theory.

Game theory is the study of the outcome of strategic interactions among decision makers. By using rigorous statistical methods, researchers can model what happens when people choose to cooperate or choose to take an aggressive, power-based approach to negotiation.

Many business leaders are taught strategies focusing on using their power and playing to win – often at the other party’s expense. In game theory, this is known as a zero-sum game, and it’s an easy trap to fall into.

Kate Vitasek lays out five rules for developing a value creation strategy.

But not every game has a clear winner or loser. In economics, a win-win game is called a nonzero-sum game. In this sort of situation, people aren’t fighting over whose slice of a pie will be larger. They’re working to grow the pie for everyone.

A second dimension of game theory is whether people are playing a one-shot or a repeated game. Think of a one-shot game as like going to the flea market: You probably won’t see your trading partner again, so if you’re a jerk to them, the risk of facing the consequences is low.

An interesting twist uncovered by studying repeated games is that when one party uses their power in a negotiation, it creates the urge for the other party to retaliate.

The University of Michigan’s Robert Axelrod, a mathematician turned game theorist, coined this a “tit-for-tat” strategy. His research, perhaps best known in the book “The Evolution of Cooperation,” uses statistics to show that when individuals cooperate, they come out better than when they don’t.

The case for leaving money on the table

Another Nobel laureate, American economist Oliver Williamson, has offered negotiating advice that most would call a paradigm shift – and some, a heresy.

That advice? Always leave money on the table – especially when you’ll be returning to the same “game” again. Why? According to Williamson, it sends a powerful signal of trustworthiness and credibility to one’s negotiating partner when someone consciously chooses to cooperate and build trust.

The opposite approach leads to lost trust and what the Nobel laureate economist Oliver Hart calls “shading.” This is a retaliatory behavior that happens when a party isn’t getting the outcome it expected from a deal and feels the other party is to blame.

Simply put, noncollaborative approaches cause distrust and create friction, which adds transaction costs and inefficiencies.

The million-dollar question is whether collaborative approaches work in practice. And from my vantage point as a scholar, the answer is yes. In fields as diverse as health care to high-tech, I see growing real-world evidence backing up the insights of game theory.

The lessons are simple yet profound: Playing a game together to achieve mutual interests is better than playing exclusively with self-interest in mind.The Conversation

About the Author:

Kate Vitasek, Professor of supply chain management, University of Tennessee

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions
13 Feb

Self-extinguishing batteries could reduce the risk of deadly and costly battery fires

By Apparao Rao, Clemson University and Bingan Lu, Hunan University 

In a newly published study, we describe our design for a self-extinguishing rechargeable battery. It replaces the most commonly used electrolyte, which is highly combustible – a medium composed of a lithium salt and an organic solvent – with materials found in a commercial fire extinguisher.

An electrolyte allows lithium ions that carry an electric charge to move across a separator between the positive and negative terminals of a lithium-ion battery. By modifying affordable commercial coolants to function as battery electrolytes, we were able to produce a battery that puts out its own fire.

Cutaway view of a Nissan Leaf electric vehicle showing part of its battery array (silver boxes).
Tennen-gas/Wikipedia, CC BY-SA

Our electrolyte worked well across a wide temperature range, from about minus 100 to 175 degrees Fahrenheit (minus 75 to 80 degrees Celsius). Batteries that we produced in the lab with this electrolyte transferred heat away from the battery very well, and extinguished internal fires effectively.

We subjected these batteries to the nail penetration test, a common method for assessing lithium-ion battery safety. Driving a stainless steel nail through a charged battery simulates an internal short circuit; if the battery catches fire, it fails the test. When we drove a nail through our charged batteries, they withstood the impact without catching fire.

Infographic showing the parts of lithium-ion battery
When a lithium-ion battery delivers energy to a device, lithium ions – atoms that carry an electrical charge – move from the anode to the cathode. The ions move in reverse when recharging.
Argonne National Laboratory/Flickr, CC BY-NC-SA

Why it matters

By nature, a battery’s temperature changes as it charges and discharges, due to internal resistance – opposition within the battery to the flow of lithium ions. High outdoor temperatures or uneven temperatures within a battery pack seriously threaten batteries’ safety and durability.

Energy-dense batteries, such as the lithium-ion versions that are widely used in electronics and electric vehicles, contain an electrolyte formulation dominated by organic molecules that are highly flammable. This worsens the risk of thermal runaway – an uncontrollable process in which excess heat inside a battery speeds up unwanted chemical reactions that release more heat, triggering further reactions. Temperatures inside the battery can rise by hundreds of degrees in a second, causing a fire or explosion.

Another safety concern arises when lithium-ion batteries are charged too quickly. This can cause chemical reactions that produce very sharp lithium needles called dendrites on the battery’s anode – the electrode with a negative charge. Eventually, the needles penetrate the separator and reach the other electrode, short-circuiting the battery internally and leading to overheating.

As scientists studying energy generation, storage and conversion, we have a strong interest in developing energy-dense and safe batteries. Replacing flammable electrolytes with a flame-retardant electrolyte has the potential to make lithium-ion batteries safer, and can buy time for longer-term improvements that reduce inherent risks of overheating and thermal runaway.

Lithium-ion battery fires in vehicles have become a major concern for firefighters because the batteries burn at very high temperatures for long periods.

How we did our work

We wanted to develop an electrolyte that was nonflammable, would readily transfer heat away from the battery pack, could function over a wide temperature range, was very durable, and would be compatible with any battery chemistry. However, most known nonflammable organic solvents contain fluorine and phosphorus, which are expensive and can have harmful effects on the environment.

Instead, we focused on adapting affordable commercial coolants that already were widely used in fire extinguishers, electronic testing and cleaning applications, so that they could function as battery electrolytes.

We focused on a mature, safe and affordable commercial fluid called Novec 7300, which has low toxicity, is nonflammable and does not contribute to global warming. By combining this fluid with several other chemicals that added durability, we were able to produce an electrolyte that had the features we sought and would enable a battery to charge and discharge over a full year without losing significant capacity.

Standard lithium-ion batteries failing the nail penetration test.

What still isn’t known

Because lithium – an alkali metal – is scarce in our Earth’s crust, it is important to investigate how well batteries that use other, more abundant alkali metal ions, such as potassium or sodium, fare in comparison. For this reason, our study focused predominantly on self-extinguishing potassium-ion batteries, although it also showed that our electrolyte works well for making self-extinguishing lithium-ion batteries.

It remains to be seen whether our electrolyte can work equally well for other types of batteries that are in development, such as sodium-ion, aluminum-ion and zinc-ion batteries. Our goal is to develop practical, environmentally friendly, sustainable batteries regardless of their ion type.

For now, however, since our alternative electrolyte has similar physical properties to currently used electrolytes, it can be readily integrated with current battery production lines. If the industry embraces it, we expect that companies will be able to manufacture nonflammable batteries using their existing lithium-ion battery facilities.

The Research Brief is a short take on interesting academic work.The Conversation

About the Author:

Apparao Rao, Professor of Physics, Clemson University and Bingan Lu, Associate Professor of Physics and Electronics, Hunan University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Economics & Fundamentals Opinions
12 Feb

Trade Of The Week: GBPUSD bears ready to strike?

By ForexTime 

  • Data heavy week for GBPUSD
  • UK data dump set to influence Pound
  • Dollar volatility also on the cards
  • Significant move on horizon
  • Key levels of interest at 50 SMA and 200 SMA

This could be an eventful week for the GBPUSD due to key economic reports from both the UK and the US.

Although prices have edged higher over the past few days, a massive range can be observed on the weekly charts.

There is a similar theme on the daily charts with resistance at the 50 SMA and support at the 200-day SMA.

After the aggressive US NFP-induced selloff witnessed earlier this month, the GBPUSD could resume its decline with the right fundamental forces.

Here are 3 factors to keep a close eye on:

  1. UK data dump 

The mid-month data dump featuring employment, inflation, and GDP among other key releases could offer fresh insight into the health of the UK economy.

  • Tuesday, February 13: UK January unemployment report

The unemployment rate is expected to rise to 4.0% in Q4 from Q3.

  • Wednesday, February 14: UK January CPI report 

The latest inflation report could rock Sterling, especially if it could offer more clues on the outlook for Bank of England (BoE) rates in 2024. Inflation is forecast to rise 4.1% year on year, up from 4% in December while the core is also forecast to hit 5.2%, up from 5.1%.

  • Thursday, February 15: UK industrial production & Q4 GDP 

Another major release will be the fourth quarter GDP report which is expected to show a second consecutive drop of 0.1% – confirming that the UK slipped into a technical recession at the end of 2023.

  • Friday, February 16: UK January retail sales

UK retail sales are forecast to fall -1.8% year-on-year in January compared to -2.4% in the previous month.

Potential GBP scenarios:

  • Sterling could appreciate if UK data including CPI exceed market forecasts – forcing investors to push back BoE cut bets.
  • Should overall data disappoint with UK inflation printing below forecasts, this may bolster BoE cut expectations – weakening the pound as a result.

  1. Key US data 

Dollar volatility could be a key theme due to a string of top-tier data and Fed speeches. It may be wise to keep a very close eye on the US CPI report and retail sales figures. 

  • Tuesday, February 13: US January CPI report 

US inflation is forecast to cool to 2.9% from 3.4% on an annual basis. The core which strips out food and energy prices is forecast to cool 3.7% from 3.9% in the prior month.

  • Thursday, February 15: US January Retail sales

US retail sales are forecast to slip -0.1% in January MoM compared to 0.6% in the prior month.

Potential USD scenarios:

  • Dollar bulls may receive a boost if strong economic data and hot inflation figures prompt investors to claw back bets for aggressive Fed cuts.
  • Dollar bears have the potential to jump back into the scene on weak US data and further signs of cooling price pressures.

  1. Technical forces 

The GBPUSD seems to be gearing up for a breakout on the daily charts with resistance at the 50-day SMA and support at the 200-day SMA. 

  • A solid breakdown below the 200-day SMA at 1.2560 could open a path towards 1.2485.
  • Should prices push beyond the 50-day SMA at 1.2670, bulls may target the next resistance around 1.2750.

Bloomberg’s FX model points to a 75% chance that GBPUSD will trade within the 1.2487 – 1.2752 range over the next one-week period.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Forex and Currency News Opinions
05 Feb

Understanding Meta’s 0.4% Yield and Its Growth Potential

By Ino.com |  Source: Understanding Meta’s 0.4% Yield and Its Growth Potential

Dividend-loving investors worldwide woke up with exciting news on Friday, as Facebook parent Meta Platforms, Inc. (META) announced its first-ever quarterly dividend and authorized a $50 billion share buyback program.

The company will pay a cash dividend of 50 cents per share on March 26 to shareholders of record as of February 22, joining other peers, including Apple Inc. (AAPL), Microsoft Corporation (MSFT), and Oracle Corporation (ORCL), which have regular payouts. META’s board intends to issue a cash dividend on a quarterly basis.

“Introducing a dividend just gives us a more balanced capital return program and some added flexibility in how we return capital in the future,” Meta’s Chief Financial Officer Susan Li told analysts on its earnings call.

META’s annual dividend of $2 translates to a yield of 0.4% at the prevailing share price. The stock finished nearly 20% higher to $474.99 on Friday after reporting better-than-expected fourth-quarter and full-year 2023 earnings.

The average yield for a dividend-paying stock in the S&P 500 is nearly 2%. Meta’s dividend payout is lower than that rate; however, companies generally start small. Now, investors can look forward to its dividend growth and stock gains.

Looking at Microsoft, the company initiated its cash dividend on January 16, 2003. Its annual dividend was $0.08 per share, which resulted in a yield of about 0.3%. A year following the dividend declaration, MSFT’s stock was up 10%, and the annual dividend for 2024 was raised to $0.16. Currently, the company pays a quarterly dividend of $0.75.

Talking about Apple, it stopped paying cash dividends in 1995 but then declared again in January 2013. Adjusting for all the splits, cash dividends in 2013 translated to an annualized yield of nearly 1.4%. A year after the dividend restart, AAPL’s stock was approximately 24% up as the company continued payouts. Since the restart, Apple has paid a total of around $34 per share.

Dividends are typically welcomed by shareholders and signal management’s confidence about the company’s future growth. Moreover, initial dividend payouts open up to investors who only hold stock in dividend payers.

Further, Meta’s recently released report marked the fourth quarter of the company’s self-described “year of efficiency,” which founder and CEO Mark Zuckerberg announced in February 2023. The company’s turnaround strategy involved layoffs and other cuts to spending, which in turn ended up being a successful effort to reverse the previous year’s revenue declines and share price weakness.

Outstanding Last Reported Financials

For the fourth quarter that ended December 31, 2023, META reported revenue of $39.17 billion, an increase of 24.7% year-over-year. The revenue surpassed analysts’ estimate of $40.11 billion. The company’s revenue from the Advertising segment grew 23.8% year-over-year, and its revenue from the Family of Apps segment rose 24.2%.

Meanwhile, META’s total costs and expenses reduced by 7.9% year-over-year to $23.73 billion. Its operating margin more than doubled to 41%, a clear sign that several cost-cutting measures are boosting profitability.

Facebook parent Meta’s income from operations rose 156% from the prior year’s period to $16.38 billion. Its net income increased 201.3% from the year-ago value to $14.02 billion. The company posted earnings per share attributable to Class A and Class B common stockholders of $5.33, compared to the consensus estimate of $1.76, and up 202.8% year-over-year.

As of December 31, 2023, META’s cash and cash equivalents stood at $41.86 billion, compared to $14.68 billion as of December 31, 2022. The company’s total assets were $229.62 billion versus $185.73 billion as of December 31, 2022.

Family daily active people (DAP) came in at 3.19 billion on average for December 2023, up 8% year-over-year. Family monthly activity people (MAP) was 3.98 billion as of December 31, 2023, an increase of 6% year-over-year.

Also, Facebook daily active users (DAUs) and Facebook monthly active users (MAUs) were 2.11 billion on average and 3.07 billion as of December 31, 2023, up 6% and 3% year-over-year, respectively.

As of December 31, 2023, the tech giant completed the data center initiatives and the employee layoffs, along with the facilities consolidation initiatives. META’s headcount was 67,317 at the end of the year 2023, a decline of 22% year-over-year.

“We had a good quarter as our community and business continue to grow,” said CEO Zuckerberg. “We’ve made a lot of progress on our vision for advancing AI and the metaverse.”

Fiscal 2024 Outlook

For the first quarter of 2024, META expects total revenue to be in the range of $34.50-37 billion. For the full year 2024, the management expects total expenses to be in the range of $94-99 billion, unchanged from the previous outlook.

The company anticipates full-year capital expenditures to be in the range of $30-37 billion, an increase of $2 billion in the high end of its prior range. Meta expects growth to be driven by investments in servers, including AI and non-AI hardware and data centers, and it plans to ramp up construction on sites with its previously announced new data center architecture.

META’s updated outlook reflects its evolving understanding of its AI capacity demands as the company anticipates what will be needed for the next generations of foundational research and product development.

Ramping up Efforts in AI and Metaverse

Meta is making consistent efforts to secure its place in the increasing AI arms race. Last month, CEO Mark Zuckerberg announced that META plans to build its own artificial general intelligence, known as AGI, which is artificial intelligence that meets or exceeds human intelligence in almost every area. He added that the company further plans to open it up to developers.

In a video posted to Meta’s social network Threads, Zuckerberg said building the best AI for chatbots, creators, and businesses requires enhanced advancement in AI across the board. “Our long term vision is to build general intelligence, open source it responsibly, and make it widely available so everyone can benefit,” he said in a post on Threads.

The tech giant announced building out its infrastructure to accommodate this push to get AI into products, and it planned to have about 350,000 H100 GPUs (graphics processing units) from chip designer NVIDIA Corporation (NVDA) by the end of this year. In combination with equivalent chips from other suppliers, Meta will have around 600,000 total GPUs by the end of the year, Zuckerberg said.

He added that the company plans to grow and bring its two major AI research groups – FAIR and GenAI – together to accelerate its work. He further said he believes that Meta’s vision for AI and the AR/VR-driven metaverse are connected.

“By the end of the decade, I think lots of people will talk to AIs frequently throughout the day using smart glasses like what we’re building with Ray Ban Meta.”

Mark Zuckerberg’s recent announcement is one of the company’s biggest pledges to double down on AI. Earlier last year, after the viral success of OpenAI’s ChatGPT, Zuckerberg announced that Meta is creating a new “top-level product group” to “turbocharge” the company’s work on AI tools.

Since then, Meta has introduced tools and information aimed at assisting users understand how AI influences what they see on its apps. The company has launched a commercial version of its Llama large language model (LLM), ad tools that can generate image backgrounds from text prompts, and a “Meta AI” chatbot that can be accessed directly via its Ray-Ban smart glasses.

In his posts last month, Meta CEO said the company is currently training a third version of the Liama model.

Impressive Historical Growth

Over the past three years, META’s revenue and EBITDA grew at CAGRs of 16.2% and 15%, respectively. The company’s net income and EPS rose at respective CAGRs of 10.3% and 13.8% over the same timeframe. Its levered free cash flow improved at 25.6% CAGR over the same period.

Moreover, the social networking company’s total assets increased at a CAGR of 13% over the same timeframe.

Favorable Analyst Estimates

Analysts expect META’s revenue for the first quarter (ending March 2024) to grow 25.3% year-over-year to $35.88 billion. The consensus EPS estimate of $4.25 for the ongoing quarter indicates a 93.3% year-over-year increase. Moreover, Meta has topped consensus revenue and EPS estimates in each of the trailing four quarters, which is remarkable.

Furthermore, Street expects Meta’s revenue and EPS for the fiscal year (ending December 2024) to grow 17.3% and 32.4% year-over-year to $158.20 billion and $19.69, respectively. For the fiscal year 2025, the company’s revenue and EPS are expected to increase 11.2% and 15.3% from the previous year to $175.98 billion and $22.70, respectively.

Solid Profitability

META’s trailing-12-month gross profit margin of 80.72% is 64.5% higher than the 49.07% industry average. Likewise, the stock’s trailing-12-month EBIT margin and net income margin of 36.33% and 28.98% are considerably higher than the industry averages of 8.47% and 3.50%, respectively.

In addition, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 28.04%, 17.84% and 17.03% favorably compared to the respective industry averages of 4.09%, 3.52%, and 1.43%. Also, its trailing-12-month levered FCF margin of 23.52% is 202.7% higher than the industry average of 7.77%.

Bottom Line

Facebook parent META recently reported a big beat on earnings and revenue for the fourth quarter of fiscal 2023. The company, which owns Facebook, Instagram, and WhatsApp, also announced its first-ever dividend of $0.50 per share and authorized a $50 billion share buyback program. Dividends generally signal management’s confidence about the company’s future growth.

Moreover, Meta’s market capitalization last month surpassed $1 trillion. The company last exceeded this mark in the market cap in 2021, when it was still known as Facebook.

Meta’s “year of efficiency” and several cost-cutting measures paid off in a significant way and offered a sweetener for investors, sending its shares higher. The stock is up nearly 38% over the past month and has gained more than 150% over the past year.

2023 was a pivotal year for the social networking giant, where it raised its operating discipline, delivered solid execution across its product priorities, and significantly improved ad performance for the businesses that rely on its services. In 2024, the company further seems well-positioned to build on its progress in each of these areas while advancing its ambitious efforts in AI and Reality Labs.

Given META’s robust financials, accelerating profitability, dividend initiation, and solid growth outlook, primarily as it seeks to strengthen its position in AI, it could be wise to invest in this stock now.

By Ino.com – See our Trader Blog, INO TV Free & Market Analysis Alerts

 

Opinions Stock Market News
04 Feb

Japanese Yen Speculators add to their bearish bets as yen falls

By InvestMacro

Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday January 30th and shows a quick view of how large market participants (for-profit speculators and commercial traders) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar.

Weekly Speculator Changes led by New Zealand Dollar & Canadian Dollar

The COT currency market speculator bets were higher this week as six out of the eleven currency markets we cover had higher positioning while the other five markets had lower speculator contracts.

Leading the gains for the currency markets was the Canadian Dollar (6,063 contracts) with the Mexican Peso (5,294 contracts), British Pound (2,716 contracts), the Swiss Franc (1,267 contracts), the New Zealand Dollar (703 contracts) and the EuroFX (447 contracts) also showing positive weeks.

The currencies seeing declines in speculator bets on the week were the Japanese Yen (-9,810 contracts) the Brazilian Real (-5,452 contracts), the Australian Dollar (-4,175 contracts), the US Dollar Index (-1,275 contracts) and Bitcoin (-137 contracts) also recording lower bets on the week.

Japanese Yen Speculators add to their bearish bets as yen falls

Highlighting the COT currency’s data this week is recent the drop in sentiment for the Japanese yen speculators. Large speculative yen positions dropped for a third straight week this week and for the fourth time out of the past five weeks. The decline over the last three weeks is a total of -24,506 contracts that has taken the speculative level from -55,949 net contracts on January 9th to this week’s total at -80,455 net contracts. The current level is now at the most bearish standing since December 12th.

The yen had seen a respite from the negative speculative bets in December and January (going from -104,956 contracts on December 5th to -55,949 on January 9th) as market watchers had been expecting the Bank of Japan (BOJ) will eventually look to end its negative interest rate policy. However, the BOJ has largely maintained their interest rate policy and thrown cold water onto the yen bulls (possibly) premature hopes.

The yen exchange rate (versus the US Dollar) has been on the back-foot now for four out of the past five weeks after having made gains through November and December. The US Dollar had fallen versus the yen and brought the USDJPY currency pair to the 140.25 mark in late December which was the best level for the yen since July. Since starting the new year, the yen has been declining and this week the USDJPY closed at approximately the 148.30 level – an almost 6 percent gain for the USD versus the yen since January 1st.

Major Currencies – Speculators Leaderboard

Legend: Weekly Speculators Change | Speculators Current Net Position | Speculators Strength Score compared to last 3-Years (0-100 range)

Strength Scores led by Mexican Peso & British Pound

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that the Mexican Peso (88 percent) and the British Pound (79 percent) lead the currency markets this week. The EuroFX (58 percent), the Brazilian Real (58 percent) and the Canadian Dollar (57 percent) come in as the next highest in the weekly strength scores.

On the downside, the US Dollar Index (25 percent) and the Japanese Yen (30 percent) come in at the lowest strength levels currently. The next lowest strength scores are the Australian Dollar (35 percent) and the Bitcoin (39 percent).

Strength Statistics:
US Dollar Index (24.7 percent) vs US Dollar Index previous week (26.9 percent)
EuroFX (58.1 percent) vs EuroFX previous week (57.9 percent)
British Pound Sterling (79.5 percent) vs British Pound Sterling previous week (77.6 percent)
Japanese Yen (29.7 percent) vs Japanese Yen previous week (35.6 percent)
Swiss Franc (47.8 percent) vs Swiss Franc previous week (44.2 percent)
Canadian Dollar (57.1 percent) vs Canadian Dollar previous week (52.0 percent)
Australian Dollar (35.4 percent) vs Australian Dollar previous week (39.2 percent)
New Zealand Dollar (52.7 percent) vs New Zealand Dollar previous week (50.9 percent)
Mexican Peso (88.2 percent) vs Mexican Peso previous week (85.0 percent)
Brazilian Real (58.2 percent) vs Brazilian Real previous week (65.3 percent)
Bitcoin (39.3 percent) vs Bitcoin previous week (41.4 percent)

 

Canadian Dollar & British Pound top the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that the Canadian Dollar (44 percent) and the British Pound (10 percent) lead the past six weeks trends for the currencies. Bitcoin (8 percent), the Swiss Franc (6 percent) and the New Zealand Dollar (6 percent) are the next highest positive movers in the latest trends data.

The Brazilian Real (-33 percent) leads the downside trend scores currently with the EuroFX (-11 percent), Japanese Yen (-9 percent) and the Australian Dollar (-7 percent) following next with lower trend scores.

Strength Trend Statistics:
US Dollar Index (-6.0 percent) vs US Dollar Index previous week (-26.9 percent)
EuroFX (-11.0 percent) vs EuroFX previous week (-25.1 percent)
British Pound Sterling (9.9 percent) vs British Pound Sterling previous week (6.8 percent)
Japanese Yen (-9.3 percent) vs Japanese Yen previous week (6.3 percent)
Swiss Franc (6.2 percent) vs Swiss Franc previous week (26.5 percent)
Canadian Dollar (43.6 percent) vs Canadian Dollar previous week (39.3 percent)
Australian Dollar (-7.0 percent) vs Australian Dollar previous week (-1.6 percent)
New Zealand Dollar (6.1 percent) vs New Zealand Dollar previous week (30.6 percent)
Mexican Peso (-2.2 percent) vs Mexican Peso previous week (0.6 percent)
Brazilian Real (-33.1 percent) vs Brazilian Real previous week (-29.7 percent)
Bitcoin (8.3 percent) vs Bitcoin previous week (6.1 percent)

Individual COT Forex Markets:

US Dollar Index Futures:

US Dollar Index Forex Futures COT ChartThe US Dollar Index large speculator standing this week came in at a net position of 372 contracts in the data reported through Tuesday. This was a weekly decline of -1,275 contracts from the previous week which had a total of 1,647 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 24.7 percent. The commercials are Bullish with a score of 77.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.4 percent.

Price Trend-Following Model: Downtrend

Our weekly trend-following model classifies the current market price position as: Downtrend. The current action for the model is considered to be: Hold – Maintain Short Position.

US DOLLAR INDEX StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:67.015.411.2
– Percent of Open Interest Shorts:65.518.39.8
– Net Position:372-739367
– Gross Longs:17,2383,9642,878
– Gross Shorts:16,8664,7032,511
– Long to Short Ratio:1.0 to 10.8 to 11.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):24.777.215.4
– Strength Index Reading (3 Year Range):BearishBullishBearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-6.04.013.5

 

Euro Currency Futures:

Euro Currency Futures COT ChartThe Euro Currency large speculator standing this week came in at a net position of 88,771 contracts in the data reported through Tuesday. This was a weekly boost of 447 contracts from the previous week which had a total of 88,324 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 58.1 percent. The commercials are Bearish with a score of 45.8 percent and the small traders (not shown in chart) are Bearish with a score of 22.4 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

EURO Currency StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:27.659.410.8
– Percent of Open Interest Shorts:15.375.47.1
– Net Position:88,771-116,00627,235
– Gross Longs:200,360432,31178,589
– Gross Shorts:111,589548,31751,354
– Long to Short Ratio:1.8 to 10.8 to 11.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):58.145.822.4
– Strength Index Reading (3 Year Range):BullishBearishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-11.011.1-6.1

 

British Pound Sterling Futures:

British Pound Sterling Futures COT ChartThe British Pound Sterling large speculator standing this week came in at a net position of 34,153 contracts in the data reported through Tuesday. This was a weekly lift of 2,716 contracts from the previous week which had a total of 31,437 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 79.5 percent. The commercials are Bearish with a score of 24.8 percent and the small traders (not shown in chart) are Bullish with a score of 64.4 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

BRITISH POUND StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:40.337.715.4
– Percent of Open Interest Shorts:22.557.213.7
– Net Position:34,153-37,3803,227
– Gross Longs:77,49972,53229,604
– Gross Shorts:43,346109,91226,377
– Long to Short Ratio:1.8 to 10.7 to 11.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):79.524.864.4
– Strength Index Reading (3 Year Range):BullishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:9.9-5.6-8.4

 

Japanese Yen Futures:

Japanese Yen Forex Futures COT ChartThe Japanese Yen large speculator standing this week came in at a net position of -80,455 contracts in the data reported through Tuesday. This was a weekly decline of -9,810 contracts from the previous week which had a total of -70,645 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.7 percent. The commercials are Bullish with a score of 68.8 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 83.6 percent.

Price Trend-Following Model: Weak Uptrend

Our weekly trend-following model classifies the current market price position as: Weak Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

JAPANESE YEN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:18.661.617.3
– Percent of Open Interest Shorts:51.828.417.2
– Net Position:-80,45580,134321
– Gross Longs:44,918148,97241,873
– Gross Shorts:125,37368,83841,552
– Long to Short Ratio:0.4 to 12.2 to 11.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):29.768.883.6
– Strength Index Reading (3 Year Range):BearishBullishBullish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-9.310.3-5.9

 

Swiss Franc Futures:

Swiss Franc Forex Futures COT ChartThe Swiss Franc large speculator standing this week came in at a net position of -3,904 contracts in the data reported through Tuesday. This was a weekly rise of 1,267 contracts from the previous week which had a total of -5,171 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.8 percent. The commercials are Bearish with a score of 45.7 percent and the small traders (not shown in chart) are Bullish with a score of 60.2 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

SWISS FRANC StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:21.252.825.9
– Percent of Open Interest Shorts:29.437.732.8
– Net Position:-3,9047,222-3,318
– Gross Longs:10,13725,24512,368
– Gross Shorts:14,04118,02315,686
– Long to Short Ratio:0.7 to 11.4 to 10.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):47.845.760.2
– Strength Index Reading (3 Year Range):BearishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:6.2-3.9-1.5

 

Canadian Dollar Futures:

Canadian Dollar Forex Futures COT ChartThe Canadian Dollar large speculator standing this week came in at a net position of -2,388 contracts in the data reported through Tuesday. This was a weekly lift of 6,063 contracts from the previous week which had a total of -8,451 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.1 percent. The commercials are Bearish with a score of 48.9 percent and the small traders (not shown in chart) are Bearish with a score of 37.4 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

CANADIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:24.554.420.1
– Percent of Open Interest Shorts:26.057.116.0
– Net Position:-2,388-4,2006,588
– Gross Longs:39,10186,76332,032
– Gross Shorts:41,48990,96325,444
– Long to Short Ratio:0.9 to 11.0 to 11.3 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):57.148.937.4
– Strength Index Reading (3 Year Range):BullishBearishBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:43.6-34.26.3

 

Australian Dollar Futures:

Australian Dollar Forex Futures COT ChartThe Australian Dollar large speculator standing this week came in at a net position of -58,295 contracts in the data reported through Tuesday. This was a weekly decrease of -4,175 contracts from the previous week which had a total of -54,120 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 35.4 percent. The commercials are Bullish with a score of 61.4 percent and the small traders (not shown in chart) are Bullish with a score of 51.1 percent.

Price Trend-Following Model: Weak Uptrend

Our weekly trend-following model classifies the current market price position as: Weak Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

AUSTRALIAN DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:22.359.113.2
– Percent of Open Interest Shorts:57.523.613.6
– Net Position:-58,29558,847-552
– Gross Longs:36,95697,88821,902
– Gross Shorts:95,25139,04122,454
– Long to Short Ratio:0.4 to 12.5 to 11.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):35.461.451.1
– Strength Index Reading (3 Year Range):BearishBullishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-7.09.5-12.0

 

New Zealand Dollar Futures:

New Zealand Dollar Forex Futures COT ChartThe New Zealand Dollar large speculator standing this week came in at a net position of -1,040 contracts in the data reported through Tuesday. This was a weekly gain of 703 contracts from the previous week which had a total of -1,743 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 52.7 percent. The commercials are Bearish with a score of 44.0 percent and the small traders (not shown in chart) are Bullish with a score of 66.4 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

NEW ZEALAND DOLLAR StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:38.245.112.4
– Percent of Open Interest Shorts:41.045.98.8
– Net Position:-1,040-2891,329
– Gross Longs:14,11416,6824,588
– Gross Shorts:15,15416,9713,259
– Long to Short Ratio:0.9 to 11.0 to 11.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):52.744.066.4
– Strength Index Reading (3 Year Range):BullishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:6.1-3.9-7.7

 

Mexican Peso Futures:

Mexican Peso Futures COT ChartThe Mexican Peso large speculator standing this week came in at a net position of 80,393 contracts in the data reported through Tuesday. This was a weekly gain of 5,294 contracts from the previous week which had a total of 75,099 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.2 percent. The commercials are Bearish-Extreme with a score of 10.3 percent and the small traders (not shown in chart) are Bearish with a score of 45.1 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

MEXICAN PESO StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:53.141.63.1
– Percent of Open Interest Shorts:21.075.81.0
– Net Position:80,393-85,7175,324
– Gross Longs:132,808103,9317,803
– Gross Shorts:52,415189,6482,479
– Long to Short Ratio:2.5 to 10.5 to 13.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):88.210.345.1
– Strength Index Reading (3 Year Range):Bullish-ExtremeBearish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-2.20.616.9

 

Brazilian Real Futures:

Brazil Real Futures COT ChartThe Brazilian Real large speculator standing this week came in at a net position of 18,298 contracts in the data reported through Tuesday. This was a weekly decline of -5,452 contracts from the previous week which had a total of 23,750 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 58.2 percent. The commercials are Bearish with a score of 40.5 percent and the small traders (not shown in chart) are Bullish with a score of 54.2 percent.

Price Trend-Following Model: Weak Uptrend

Our weekly trend-following model classifies the current market price position as: Weak Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

BRAZIL REAL StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:48.138.14.4
– Percent of Open Interest Shorts:24.564.41.6
– Net Position:18,298-20,4242,126
– Gross Longs:37,24829,4543,388
– Gross Shorts:18,95049,8781,262
– Long to Short Ratio:2.0 to 10.6 to 12.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):58.240.554.2
– Strength Index Reading (3 Year Range):BullishBearishBullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:-33.134.2-15.1

 

Bitcoin Futures:

Bitcoin Crypto Futures COT ChartThe Bitcoin large speculator standing this week came in at a net position of -1,798 contracts in the data reported through Tuesday. This was a weekly decline of -137 contracts from the previous week which had a total of -1,661 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.3 percent. The commercials are Bullish-Extreme with a score of 90.6 percent and the small traders (not shown in chart) are Bearish with a score of 30.7 percent.

Price Trend-Following Model: Uptrend

Our weekly trend-following model classifies the current market price position as: Uptrend. The current action for the model is considered to be: Hold – Maintain Long Position.

BITCOIN StatisticsSPECULATORSCOMMERCIALSSMALL TRADERS
– Percent of Open Interest Longs:79.96.16.9
– Percent of Open Interest Shorts:88.61.13.2
– Net Position:-1,7981,017781
– Gross Longs:16,5191,2531,435
– Gross Shorts:18,317236654
– Long to Short Ratio:0.9 to 15.3 to 12.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):39.390.630.7
– Strength Index Reading (3 Year Range):BearishBullish-ExtremeBearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:8.3-7.3-6.0

 

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

COT Updates Forex and Currency News Opinions
02 Feb

Speculator Extremes: DowJones, Nasdaq, Soybeans & Corn lead Bullish & Bearish Positions

By InvestMacro 

The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Friday for data ending on January 30th.

This weekly Extreme Positions report highlights the Most Bullish and Most Bearish Positions for the speculator category. Extreme positioning in these markets can foreshadow strong moves in the underlying market.

To signify an extreme position, we use the Strength Index (also known as the COT Index) of each instrument, a common method of measuring COT data. The Strength Index is simply a comparison of current trader positions against the range of positions over the previous 3 years. We use over 80 percent as extremely bullish and under 20 percent as extremely bearish. (Compare Strength Index scores across all markets in the data table or cot leaders table)

Here Are This Week’s Most Bullish Speculator Positions:

DowJones Mini

The DowJones Mini speculator position comes in as the most bullish extreme standing this week. The DowJones Mini speculator level is currently at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score totaled 28.1 this week. The overall net speculator position was a total of 24,410 net contracts this week with a rise of 6,162 contract in the weekly speculator bets.

Speculators or Non-Commercials Notes:

Speculators, classified as non-commercial traders by the CFTC, are made up of large commodity funds, hedge funds and other significant for-profit participants. The Specs are generally regarded as trend-followers in their behavior towards price action – net speculator bets and prices tend to go in the same directions. These traders often look to buy when prices are rising and sell when prices are falling. To illustrate this point, many times speculator contracts can be found at their most extremes (bullish or bearish) when prices are also close to their highest or lowest levels.

These extreme levels can be dangerous for the large speculators as the trade is most crowded, there is less trading ammunition still sitting on the sidelines to push the trend further and prices have moved a significant distance. When the trend becomes exhausted, some speculators take profits while others look to also exit positions when prices fail to continue in the same direction. This process usually plays out over many months to years and can ultimately create a reverse effect where prices start to fall and speculators start a process of selling when prices are falling.

Nasdaq


The Nasdaq speculator position comes next in the extreme standings this week. The Nasdaq speculator level is now at a 100.0 percent score of its 3-year range.

The six-week trend for the percent strength score was 26.5 this week. The speculator position registered 39,251 net contracts this week with a weekly increase of 6,209 contracts in speculator bets.

3-Month Secured Overnight Financing Rate


The 3-Month Secured Overnight Financing Rate speculator position comes in third this week in the extreme standings. The 3-Month Secured Overnight Financing Rate speculator level resides at a 96.7 percent score of its 3-year range.

The six-week trend for the speculator strength score came in at 6.6 this week. The overall speculator position was 705,145 net contracts this week with a decline of -64,042 contracts in the weekly speculator bets.

Gasoline


The Gasoline speculator position comes up number four in the extreme standings this week. The Gasoline speculator level is at a 94.0 percent score of its 3-year range.

The six-week trend for the speculator strength score totaled a change of 1.0 this week. The overall speculator position was 73,270 net contracts this week with a dip of -471 contracts in the speculator bets.

Mexican Peso


The Mexican Peso speculator position rounds out the top five in this week’s bullish extreme standings. The Mexican Peso speculator level sits at a 88.2 percent score of its 3-year range. The six-week trend for the speculator strength score was -2.2 this week.

The speculator position was 80,393 net contracts this week with an increase of 5,294 contracts in the weekly speculator bets.

This Week’s Most Bearish Speculator Positions:

Soybean Oil


The Soybean Oil speculator position comes in as the most bearish extreme standing this week. The Soybean Oil speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -13.0 this week. The overall speculator position was -38,035 net contracts this week with a drop of -12,677 contracts in the speculator bets.

Corn


The Corn speculator position comes in next for the most bearish extreme standing on the week. The Corn speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -12.7 this week. The speculator position was -224,832 net contracts this week with a decline of -5,632 contracts in the weekly speculator bets.

Soybeans


The Soybeans speculator position comes in as third most bearish extreme standing of the week. The Soybeans speculator level resides at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -36.4 this week. The overall speculator position was -140,577 net contracts this week with a reduction of -34,583 contracts in the speculator bets.

Soybean Meal


The Soybean Meal speculator position comes in as this week’s fourth most bearish extreme standing. The Soybean Meal speculator level is at a 0.0 percent score of its 3-year range.

The six-week trend for the speculator strength score was -45.2 this week. The speculator position was -33,932 net contracts this week with a shortfall of -13,316 contracts in the weekly speculator bets.

10-Year Note


Finally, the 10-Year Note speculator position comes in as the fifth most bearish extreme standing for this week. The 10-Year Note speculator level is at a 2.8 percent score of its 3-year range.

The six-week trend for the speculator strength score was -16.0 this week. The speculator position was -859,015 net contracts this week with a decline of -74,337 contracts in the weekly speculator bets.

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

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COT Updates Forex and Currency News Opinions
02 Feb

African countries are struggling with high debt, demands to spend more and collapsing currencies: the policy fixes that could help

By Jonathan Munemo, Salisbury University 

Highly indebted African countries are facing stark trade-offs between servicing expensive debt, supporting high and growing development needs, and stabilising domestic currencies.

Government debt has risen in at least 40 African countries over the past decade. As a result, some are experiencing a bad combination of high debt, elevated development spending needs amid budget shortfalls, and unfavourable exchange rate pressures.

These issues have become more pressing since 2022, when persistently high inflation prompted major central banks around the world to embark on the most aggressive monetary tightening campaign in decades. Monetary policy tightens when central banks raise interest rates.

Since then, global interest rates have climbed even higher, triggering a jump in repayments on external loans and adding to debt burdens accumulated over the last decade. In addition, some countries with worsening debt situations have endured large exchange rate depreciations and struggled to stabilise the value of their domestic currencies.

My perspective, shaped by years of researching Africa’s development challenges, is that this presents many countries with a triple set of dilemmas that’s not easy to navigate. Tackling any of one of these issues imperils the others.

Here are some examples:

  • stemming the rise in public debt and containing exchange rate decreases would make it more difficult to meet bigger public spending needs
  • pushing for lower public debt while supporting extra spending risks putting more strain on domestic currencies
  • prioritising higher spending needs and easing currency strains runs the risk of inviting extra government debt.

Steps can be taken to expand the policy space to tackle these challenges while easing difficult trade-offs. These steps include prioritising public spending measures that raise growth, fixing the revenue collection problem facing all African countries, and restructuring unsustainable government debt.

Rising government debt and policy dilemmas

The triple dilemma unfolded as government debts rose substantially over the last decade. As shown in Figure 1, median government debt has more than doubled since 2012 and amounted to 61% of GDP as of 2023.

At first, historically low global interest rates in the decade after the global financial crisis in 2008 contributed powerfully to burgeoning debt by making it easy to borrow large amounts of cheap money.

The debt trends of countries have worsened sharply since then. Factors have included the COVID-19 pandemic, which triggered a cost-of-living crisis, and Russia’s invasion of Ukraine, which contributed to a rapid rise in global interest rates.

In Africa, the pain from higher borrowing costs is particularly acute for governments, given that public debt represented nearly 60% of the region’s total external debt in 2022 (Figure 1). Nineteen countries, including Ghana and Zambia, are already in debt distress (meaning they are unable to meet financial obligations) or at high risk of debt distress.

Ghana’s public debt has more than doubled since 2012 and amounts to 85% of GDP. Zambia’s went up much higher and stood at 98% as of 2022.

Both Ghana and Zambia, along with Ethiopia, have defaulted on their foreign debt, sparking fears about a broader sovereign debt crisis on the continent if more countries fall into debt distress.

Others face high risk of debt distress. Kenya is on the edge of financial distress after its debt increased steadily to 70% of GDP. South Africa also faces elevated public debt, which has almost doubled over the last decade and currently stands at 74% of GDP.

And yet trimming high debts won’t be easy. Development needs are high after coffers were drained by higher spending tied to the pandemic and fallout from Ukraine.

The International Monetary Fund estimates that the median sub-Saharan African country needs to increase spending by at least 20% of GDP to meet sustainable development goals on health, education and infrastructure by 2030. Climate change adaptation is expected to add billions of dollars each year for the continent.

Coffers are also being depleted by more money being spent repaying expensive loans. This has the additional effect of depleting foreign exchange reserves, which means countries overburdened by debt also have to contend with weakening currencies.

Kenya’s debt interest payment as a share of revenue rose from 11% in 2014 to more than 20% after 2020. This depleted its reserves as a share of external debt from 47% to less than 20% over the same period. This has pressured the Kenyan shilling, which lost more than 19% against the US dollar last year.

In the cases of Ghana and Zambia, debt interest payments climbed even higher. For Ghana they were around 45% of revenue. For Zambia, around 39%. By 2022 reserves had dwindled to 22% in Ghana and to 10% in Zambia.

This precipitated large depreciations of Ghana’s cedi and Zambia’s kwacha.

South Africa’s debt interest payments increased at a relatively slower pace to about 15% of revenue after 2021 and it kept a higher reserve share of about 35%. This was why the decline in the rand was not as steep as in the other three countries.

Weakening currencies also make foreign debt servicing costlier. Consequently, reasonable debt can quickly turn into unmanageable debt.

Lower government revenue collection has also intensified debt risks.

In 2023, revenue collected was 16% of GDP in Ghana, 17% in Kenya and 21% in Zambia. This is significantly below the 27% median level seen in other developing economies. Although this median level is matched by South Africa, rising costs of social transfers including welfare grants and subsidies to state-owned enterprises such as the power utility Eskom and transport utility Transnet have added upward pressure on public debt amid slowing growth.

What can be done

A number of steps can be taken to alleviate the trade-offs countries are having to make.

Firstly, governments should prioritise public spending measures that raise growth.

These include critical spending on education, health, infrastructure and other high-quality growth enhancing investments. As economic growth picks up, it is likely to generate more government revenue to pay down the debt.

It also means allocating more spending on first generation reforms. These are structural reforms that alleviate major growth constraints. For example, long-standing reforms in governance remain critical in African countries which generally lag behind countries in other regions on various measures of governance quality such as rule of law, control of corruption and government accountability.

Secondly, countries need to fix their revenue collection problems. While growth leads to a larger economy that generates additional revenue, low levels of domestic revenue collection constrain the ability of governments to pay down debt and fund vital social and growth sectors.

Across Africa, several countries, including South Africa, Nigeria, Ghana, Zambia, Kenya and Ethiopia, have mobilised efforts to spur gains in revenue collection. These include new levies, higher taxes, registering more shops on the tax roll, broadening tax bases, strengthening tax administration and other revenue enhancing measures.

Lastly, governments need to restructure their debt portfolios. When a debt crisis cannot be avoided, restructuring debt can reduce the amount owed to creditors by revising the amount and timing of future principal and interest payments. Chad reached an agreement to restructure its external debt under the G20 Common Framework for Debt Treatment in 2022. This is an initiative designed to support low income developing countries with unsustainable debt. Since then, Ghana and Zambia have also launched debt restructuring negotiations under the G20 Common Framework.

Other highly indebted countries struggling to service their liabilities may have to do the same amid rising concerns about slow progress of the Common Framework.The Conversation

About the Author:

Jonathan Munemo, Professor of Economics, Salisbury University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Forex and Currency News Opinions
02 Feb

Week Ahead: Gold set for potentially volatile week

By ForexTime 

  • Big week ahead for gold due to risk-events
  • Watch out for geopolitical developments
  • Real shaker could be US CPI revisions
  • Bulls back in action D1 chart
  • Bloomberg model: 74% chance XAUUSD trades within the $2019.23 – $2095.58

Even as anticipation mounts ahead of the US jobs report this afternoon (Friday 2nd February), mindful investors may be keeping tab on what’s to come in the week ahead.

Key economic reports from across the world and speeches by Fed officials will be in focus. However, the real shaker could be the revised US CPI figures which have the potential to make or break expectations around rate cuts.

Monday, 5th February

  • CNH: China Caixin PMI’s
  • AUD: Australia MI inflation, PPI
  • JPY: Japan Jibun Bank PMI’s
  • EUR: Eurozone S&P Global Services PMI, PPI
  • USD: US S&P Global Services PMIs, ISM

Tuesday, 6th February

  • AUD: RBA rate decision
  • EUR: Eurozone retail sales, Germany factory orders
  • USD:  Cleveland Fed President Loretta Mester, Philadelphia Fed President Patrick Harker speech

Wednesday, 7th February

  • CNH: China forex reserves
  • EUR: Germany industrial production
  • US30: Walt Disney earnings
  • USD: Fed Governor Adriana Kugler, Richmond Fed President Tom Barkin speech

Thursday, 8th February

  • CNH: China PPI, CPI
  • USD: US initial jobless claims, Treasury Secretary Janet Yellen speech

Friday, 9th February

  • CNH: China money supply, new yuan loans
  • CAD: Canada unemployment
  • EUR: Germany CPI
  • USD: Revisions: CPI
  • Lunar New Year’s Eve celebrations

After shedding just over 1% in January, gold prices could be ready to shine in the new month due to various fundamental forces.

Despite initially weakening on the Fed’s hawkish remarks, the precious metal bounced back thanks to falling Treasury yields and heightened geopolitical risks concerning the developments in Jordan.

Note: The incoming US jobs report this afternoon could result in heightened volatility for gold prices.

With bulls making their presence known and pressing against resistance, a potential breakout could be on the horizon.

Here are 3 factors that may rock gold:

  1. US CPI revisions

Top-tier US economic data and Fed speeches are likely to influence gold prices throughout the week.

However, the gamechanger may be the US CPI revisions published on Friday.

The CPI revisions are released once every year with seasonally adjusted factors recalculated to reflect price movements from the just-completed calendar year (2023). It does not end here; this routine annual recalculation also looks at inflation for the previous 5 years. So essentially, investors will see revised figures for the period January 2019 through December 2023.

Why is this a big deal?

One of the major themes influencing financial markets last year was signs of falling inflation!

This fuelled speculation around central banks cutting interest, supporting equity markets along with gold prices as a result.

So essentially, any major revisions to the CPI could heavily influence expectations around Fed rate cuts.

  • Gold prices could push higher if the CPI revisions confirm that inflation has been trending downwards.
  • Any major revisions that show CPI was higher than expected, could hit gold as investors re-evaluate expectations around Fed cuts.

  1. Geopolitical tensions

The negative developments concerning the United States and Iran could keep markets on edge.

Geopolitical tensions are likely to influence gold prices as investors brace for the US response to attacks on US troops in Jordon. Concerns are likely to rise over any retaliation escalating US-Iran tensions even further. This growing uncertainty and unease may stimulate appetite for safe-haven assets like gold

  1. Technical forces

Gold seems to be turning bullish on the daily charts with prices trading above the 50, 100 and 200-day SMA.

  • A solid breakout and daily close above $2060 may open a path to the 2024 high at $2079 and $2085.
  • Should prices fail to break above $2060, this could trigger a selloff towards the 50-day SMA at $2032 and support around $2020.

Bloomberg’s FX model points to a 74% chance that XAUUSD will trade within the $2019.23 – $2095.58 range over the next one-week period.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Economics & Fundamentals Opinions
01 Feb

Is This Rare Earth Stock Undervalued?

Source: Clive Maund  (1/29/24) 

Technical Analyst Clive Maund takes a look at Defense Metals Corp.’s 5-year, 15-month, 4-month, and 2-month charts to explain why he believes it is an Immediate Speculative Buy.

Given the excellent and improving fundamentals for Defense Metals Corp. (DEFN:TSX.V; DFMTF:OTCQB; 35D:FSE), it is rather surprising that its stock is not already a lot higher than it is. The core of the story is that the company is advancing a major Rare Earth Metals resource that is situated in North America toward production at a time when demand looks set to ramp up due to increasing demand from the defense industry due to the proliferation of various military conflicts around the world as supplies from the world’s biggest producer of Rare Earth Metals — China — are at risk of being choked off and possibly halted completely.

On its 5-year chart, we see that, apart from a dramatic spike early in 2021 that was completely reversed, the price has essentially been rangebound throughout this period, but even on this long-term chart, we can see that there is something different about the recent rally which kicked off with a large gap move out of the preceding downtrend that was accompanied by the strongest upside volume for at least 5 years, driving the Accumulation line strongly higher.

This action implies that it is going to do more — probably a lot more — than simply rally up to the resistance level shown at the upper boundary of the broad trading range.

Zooming in via a 15-month chart that allows us to see the preceding downtrend in its entirety, we can see the powerful breakout last month. This move was on a very heavy volume and accompanied by a large gap, which, taken together, have strongly bullish long-term implications and portend that the stock will eventually head much higher.

This advance took the price up quickly to hit the resistance level in an overbought state, which is why it has since stopped to consolidate.

On the 4-month chart, we can examine recent action in much more detail, and on this chart it can be discerned that all of the action leading into the recent low and that has followed comprises a rather odd-shaped Cup & Handle base and it is clear that, following the move that broke the price out of the downtrend in December, it has been consolidating to form the Handle of this base pattern, with this period of consolidation allowing time for the earlier overbought condition to ease and for the rising 50-day moving average to pull up closer to the price, the better to propel the next upleg that will break the price out above the resistance at the top of the Handle of the pattern and quickly lead to a bullish cross of the moving averages. Interestingly and unusually, the Handle of this pattern itself contains a lower order Cup & Handle continuation pattern rather in the manner of “Russian dolls” that we will now look at on a 2-month chart.

The 2-month chart “opens out” the action following the sharp December breakout move, enabling us to see the fine small Cup & Handle pattern that has formed, which, unlike the larger order Cup & Handle pattern, is not classed as a base, because it has nothing to reverse, and it is therefore instead classed as Cup & Handle continuation pattern, rather like the Head-and-Shoulders continuation patterns that we sometimes see.

The most important point to observe on this chart, apart from the price action, is the strongly bullish volume pattern, with the gap breakout move being on heavy volume that has since progressively died back, especially as the Handle of this little pattern has formed, with the Accumulation line holding up well all the while.

With the Handle of this pattern looking complete and the Handle of the larger order pattern shown on the 4-month chart also looking complete, and volume now very light, the right conditions exist for another upleg to start soon.

Defense Metals is therefore rated an Immediate Strong Buy for all timeframes, and it is not regarded as being an unduly speculative investment.

Defense Metals’ website.

Defense Metals Corp. closed at CA$0.24, $0.18 on January 26, 2024.

 

Important Disclosures:

  1. [Defense Metals Corp.] is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
  2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of [Defense Metals Corp.].
  3. Street Smart, an affiliate of Streetwise Reports, has compensated [Clive Maund], for writing this article. However, the views, opinions, analyses, and any recommendations in [Maund]‘s article are solely their own personal views, opinions, analyses, and recommendations, and are expressly not those of Street Smart or Streetwise Reports. The content created by [Maund] is about companies they believe in based on their personal investment opinions and analyses, and their opinions and analyses are not influenced or dictated by Streetwise Reports or its affiliates or as a result of compensation provided by Street Smart.
  4. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found  below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
  5.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

For additional disclosures, please click here.

Clivemaund.com Disclosures

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund’s opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund’s opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.

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