12-17-21 Neo-Kirchnerism: the never-ending inflation

A week with bearish indices, strong dollar pushes Commodities causing gold to pull back slightly at the end of Friday and oil to close lower. Cryptos have followed the dollar's tune. The high volatility adds to the year-end strategies of big investors, and the fear of the Omicron variant.

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The floor of Wall Street has been stained red on the Friday of the quadruple witching hour. These are days of high volatility, and in particular are being accompanied by investors re-rating the duration of companies with long-duration growth that is usually accompanied by growth rates, generating huge volumes during the day and in particular at the opening and closing. A week marked by the fear of the omicron variant and new inflationary data provided by Jerome Powell has overshadowed all the optimism before the announcement of the US Federal Reserve, which has announced its acceleration in the withdrawal of stimulus in the face of a stronger economy. On Wednesday the Fed chairman has admitted to widespread inflation across all sectors and an institutional pursuit of 2% well into 2022.

S&P 500 closed at 4,620.64 points, -1.94%. DOW JONES closed at 35,365.44 points, down -1.69%, NASDAQ 100 closed at 15,801.46 points, down -3.25%.

This change has generated a broad-based rally in stocks that was extinguished on Thursday and Friday with sharp declines. This has a rational explanation, as the Fed becomes more hawkish and expectations of higher interest rates increase, investors will decrease their exposure to the stock market. This affects the mood of the market.

(WSJ, 2021) "The main underlying fear in the market is inflation," according to David Donabedian, chief investment officer at CIBC Private Wealth, noting that the central bank may need to accelerate interest-rate hikes if inflation continues on its upward path.

The bond market has taken a hit this week, after climbing from 1.46% last week, it fell on Friday to 1.4% on the back of market volatility.

On Thursday the European Central Bank and the Bank of England, against all odds, have gone their separate ways. The British have decided to follow the Fed's path, while the Europeans have chosen to prolong their current situation of debt issuance, which is not expected to change during 2022, and that, while the intensity of bond purchases decreases, they will continue to launch stimuli to boost the eurozone economy.

Especially the biggest beneficiaries in all this rate hike have been the banks. The biggest beneficiaries in the list are Bank of America and Wells Fargo, which if the short and long-term interest rates were to rise by 1%, they would take more than 7 trillion in additional profits. It would be followed by JP Morgan with about 6.7 billion, Morgan Stanley with 1.5 billion, CitiGroup and Goldman Sachs would enter about 800 million extra. This happens because as in 2015, in the last cycle of rising interest rates, banks are not expected to raise the return to savers, so that the increase would be purely bank profits.

These sharp price swings on Friday are not just a quadruple witching hour, according to the U.S. government, financial stability risks are elevated as weather, Covid, and crypto dangers increase. Add in inflation and employability reports that suggest investors are overly fearful.

(Reuters,2021) "For the market to continue to move forward, it becomes ... dependent on fewer and fewer names," "Any change in the performance of the names that carry the market will not be met with strength in any of the other parts of the market," according to Peter Cecchini, director of research at Axonic Capital.

Concentrated positioning can also exacerbate volatility if risk appetite suddenly dries up, sending investors to the exit all at once.

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"The door may not be wide enough to accommodate everyone who wants to rush out," according to AE Wealth Management's Siomades.

?In Europe, the DAX closed at 15,531.69 points, -0.59%, the EURO STOXX 50 closed at 4,161.35 points, -0.9%. In the United Kingdom, the FTSE 100 closed at 7,269.92 points, down 0.3%.

Asia-Pacific closed the HANG SENG at 23,192.63 points down -1.21%. The S&P/ASX 200 closed at 7,304.00 points, down -0.67%, and the NIKKEI 225 closed at 28,440.00 points, up 0.49%.

(Reuters) According to the regulator, China Securities Journal has reported that net profits of China's centrally owned state-owned enterprises amounted to $275 billion in January-November.

(Reuters) Hong Kong's first patriotic elections have been pushed this week, with the city's leaders and China's leadership in Beijing trying to boost popular support for the elections despite democracy activists fleeing Hong Kong after police charged 47 activists with conspiracy to commit subversion. After that reducing the number of elected seats and allowing more than a third of the seats in Beijing's favor. The 2016 election had 58% of eligible voters. The lowest since the 1997 handover was 43.6% in 2000.

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Currencies have had a strong move with the dollar setting the pace. Bank of London policy has pushed the value over the euro. USDCAD 1.37%, USDCHF 0.31%, USDJPY 0.26%, GBPJPY 0.07%, GBPUSD -0.22%, EURJPY -0.34%, EURGBP -0.38%, EURUSD -0.63%, AUDUSD -0.64%, NZDUSD - 0.85%.

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Gold (XAUUSD), this week has seen a pullback from Wednesday to Friday where it reached $1,815.6 has pulled back to close at $1,798.2. Gold seems to be creating a bullish process which may be the start of its trend with strength. Silver (XAGUSD), has seen a rally just like gold as bonds have declined in value. It has closed at $22,365 after reaching $22,685.

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Cryptocurrencies have been erratic all week following the bearish movement of last week, and in the case of Bitcoin experiencing a turnaround rally on Wednesday, but then falling again at the end of the week. Ethereum has experienced similar situations, but one senses that they have different growth potential. BTCUSD closed at $46,596.5. ETHUSD closed at $3,834.62. Bitcoin's move has been forming a Shoulder-Head-Shoulder and looks like it could point to a price recovery. Ethereum also seems to have formed an uptrend.

(investing) this week Garry Kasparov, one of the greatest chess players of all time, if not the greatest, has released a collection of NTFS. Notable from the Investing interview is the claim that these have staying power and that cryptocurrency will stand the test of time. He claims that these byproducts of the digital age are the way society is moving forward and becoming more and more digital. One cannot get away from the political complications of the world, and what is happening in the free world, elections, promises, and debates, or what is happening in the unfree world, such as dictators deciding it is time to ban cryptocurrencies. He expresses that the dollar is weak, and the only reason it is a reserve currency is that other currencies are worse, so there is relativity. On AI, he expresses the current difficulty of transferring knowledge from one context to another without human supervision. On privacy, he talks about the fact that data generation is inevitable and many countries without GDPR are collecting data mercilessly. Finally, he closes the interview by mentioning that he owns Cryptos in particular bitcoin and Ethereum among others, and expects great performance.

(coinmetrics) it is noteworthy that there is a divergence between the buying behavior of whales and small bitcoin holders. Whales control between 1000 and 10000 BTC while retailers control less than 1 BTC. We are at a point where whales are distributing and retail buyers are buying. There is a presumption that whales are always more sophisticated than investors, but there are more retail holders, so the divergence is reflective of how bitcoin has moved sideways and clumsily lately.

Of note is the move by both Putin and the Biden administration to try to curb the development of BTC as a key market currency, claiming that they can be a danger to economic stability. Nayib Bukele has recently made comments about this, saying that the United States should stop issuing debt.

Vladimir Putin claimed not too long ago that cryptocurrencies are a great opportunity for money laundering and terrorist financing. And in November he claimed that bitcoin has value and utility, but he doubts that it is useful for the oil market because it is very volatile. In countries like Australia, banks are already starting to offer cryptocurrency services.

Crude oil this week has seen two distinct weeks from Monday to Thursday and Thursday to Friday. The black gold created a gap up to $72.98, and then after the news of viral expansion and limitations, has generated fear in producers and has caused the West Texas crude oil to close at $70.30. Brent has formed the same figure reaching $75.58, ending Friday at $72.98.

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Using the Austrian school of economics with Milton Friedman, as one of its main liberal referents, Javier Milei, today Friday, clearly expressed something that has been written for years: Inflation is always and everywhere a monetary phenomenon!, after taking office, during the debate of the Budget 2022, not approved. The representative of the interblock La Libertad Avanza has exposed the reasons why his political space rejects the financial plan presented by Kirchnerism, the political space that currently governs Argentina.

Since the Peronist era in Argentina, the figure of social justice was already being worked on, and thanks to social justice as an ideological banner, and economic policies that were accompanied by an expansion of the internal market including marginalized sectors and an increase in the income and salaries of the most disadvantaged sectors, interventionism and nationalization of strategic sectors, promotion of industrialization and national production and finally economic planning. Peronism was accompanied by Catholic Christianity to seal the idea. All these factors created a movement of trade unionism and popular conservatism and anti-Peronism. Finally reaching the pinnacle of Peronism in the presidency of Isabel Perón, of the Argentine anti-communist Alliance, which launched a generalized butchery. All this passed to Menemism, which, together with the fall of the Berlin Wall, with the Justicialist Party, led to a liberal movement of massive privatization and liberalization and flexibilization of labor, repeal of collective bargaining agreements, and so on. If we move on to Kirchnerism, the heir of the political situation caused even before Menem, Néstor Kirchner kept Duhalde and Lavagna and took advantage of the increase in the price of Commodities, and through a system of retentions achieved financial stability in the public accounts, increased the GDP to a great extent, and created millions of jobs.

Kirchner together with Brazil got out of debt from the IMF, avoiding this conditioning, highly linked to the Argentine crisis and managing to reschedule the external debt, write-offs, etc. He did a monumental job reducing the debt from 147.20% to 38.94%, which made the people adore him.

The dissident neo-Peronism, split into Carlos Menem and the brothers Adolfo and Alberto Rodríquez Saá, that is to say, Menemism and Adolfism. Ramón Puerta and Luis Barrionuevo among others, generated more problems than solutions, with the increase of widespread corruption and debt.

From Menem, who was one of the main causes of the increase in foreign debt, to de la Rúa and the crisis of convertibility of the peso against the dollar, the current Argentine society has been dragging along the whole debt problem that has not been able to be cleaned up. The current Neo Kirchnerism, of Cristina Kirchner, is nothing like the original, which was grandma's account, so much I have, so much spending, trying to reduce the debt. Argentine governments have been characterized by an excess of corruption and indebtedness, and of a, someone else will pay for it...

Today, after Macri's government, the summum of political delinquency, there has been an inability to pay and an increase in the fiscal deficit. The new Argentina of this year inherits a level of debt that is not possible to manage with so much corruption in the middle. The parties of a more communist or socialist bent have only demonstrated poor management compared to the parties of a more liberal bent, except for the great economist Néstor Kirchner, an example of economic recovery and that things can be done well. People like Javier Milei, although in the opposition, have the good sense to communicate the reality of their own country straightforwardly and directly. It is not possible to lead a country full of corrupt people in government, who for god knows what reason win again and again, perhaps the failure is more in the forms than in the facts. With this, we are not indicating a particular political position regarding this, but it is clear that the only thing Cristina Kirchner has been able to do well, is to position herself at the international social and political level, which she has not been able to do, is to help her country to rise as her husband did. She tried to wink at Republican politicians this week by referring to inflation, and some sort of false ideological tune. When in fact the facts indicate that they have been as a party the cause of the current disaster, of a peso that has no value in the market and the only country that exchanges it is Uruguay, and largely due to the Balance of Trade. The Coalition Frente de Todos, which is a movement that was forged to defeat Mauricio Macri, of which Milei is part as an ally in the coalition, although of clearly right-wing thinking according to the social context of the country, is part of the team of the lesser evil, under that context of high corruption. As you can see,?who is the least scandalously corrupt party? Well, that's whom I vote for. It is an impossible union that only unites them in economic policy because in terms of ideology they are like trying to unite water and oil. In this case, Alberto Fernández repeats as president of this union.

The problem with the world's heavily dollarized economy is that the entire planet is indirectly suffering from this inflation. You could say that Jerome Powell and the presidency of Argentina had an "economic affair", since they have practically dedicated themselves to producing unlimited debt, and now they seem to have come up with the same idea as couples sleeping together. A great solution for Argentina would have been to switch to the Bitcoin standard like El Salvador has done, instead of singing "Don't Cry for me Argentina" after seeing the election results concerning the debt that is being generated globally. This chronic inflation is like bad economic pneumonia that cannot be cured, it becomes chronic, and nobody remedies it, because it doesn't matter who is there. Milei already said that the Argentine economy was de facto dollarized, and it was ridiculous to use the peso, which is like a crazy thermometer that constantly changes its temperature.

It is clear that in politics the fear of change is what sells best, and people are too hooked on the inflationary drug and the use of the dollar to be interested in changing now, especially those who handle the most capital. Which in general are those who are higher up in the leadership of the parties.

(CNN, 2021) "Socialism is a poverty-generating machine," said Javier Milei, the right-wing candidate who surprised in Argentina's primary elections, in September.

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Happy Trading and Happy Friday!

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*This article only expresses my opinion and under no circumstances represents an investment recommendation, but a purely educational document.

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