(07-23-21)Cladding: The Enemies of Reality

A Monday in the red has not prevented the DOW JONES from ending the week at highs and the rest of the indices in positive territory. BigTech stocks were able to drive all of them higher. Despite the internet blackout suffered this week and the massive sell-off in stocks on Monday, the markets have recovered. U.S. bonds continue to fall in value. Gold prepares bullish supports. Cryptos end a week in the green after a bearish period. Oil continues its rally following the OPEC+ statements.

After the correction of the previous week, this week, the Indices have mostly finished in green, touching all-time highs. DOW JONES, has suffered a variation of +248.20 points in positive ending at 35,061.55. SP500 +44.32 points with 4,411.80. Even the IBEX35, has recovered reaching 8,717.20 points, and a super-strong FTSE MIB retaking +319.70 points up to 25,124.91. DAX has shown a strong performance reaching 15,669.29 and CAC40 has reached 6,568.82 points. The end-of-week results were triggered by market giants Twitter (TWTR: NYSE), Facebook (FB: NASDAQ), Alphabet (GOOGL: NASDAQ), and companies such as American Express (AXP: NYSE), which spread optimism to the market. In the aftermath of the internet crash, telecom companies such as Akamai (AKAM: NASDAQ), are seen as vital to the functioning of the network.

All this turmoil followed a massive sell-off in U.S. equities on Monday, which caused all currencies to fall sharply and unexpectedly. While monetary policy is a long-term driver of currency flows, risk appetite has a very important short-term influence on currency movements. Confidence is key, since, if big investors get nervous, that's all that matters. All this nervousness has come in the wake of the Delta variant of the coronavirus, the excess inflation that affects rising prices and may affect the quantitative easing measures that most central banks are providing. In the previous weekend, restrictions and obligations have been imposed practically all over Asia due to the increase in infections, despite mass vaccination.

This type of fall usually causes falls and has been reflected in the US 10-year bond trading at 1.281%, slightly lower than last week. Germany has placed its 30-year debt at a negative rate of -0.06% through the "Finanzagentur des Bundes" (Similar to the Treasury).

The ECB's monetary policy report has been consistent with previous announcements, which has led to a neutral movement on Friday, positioning the euro (EURUSD) at pre-announcement levels. However, the weekly bearish progression has been broken, although the monthly trend remains in place. The Pound (GBPUSD) this week has seen a price recovery, despite continuing in its monthly downtrend, and should be checked to see if this trend will not be broken. It is not expected to happen sooner or later and the predictable thing is a fall in price as the trend continues.

This week the price of the blue dollar was issued in Venezuela, and surprisingly, (EFE) the price exceeds 4 million bolivars. This country is undergoing spontaneous transactional dollarization, after the last issue, the highest denomination bill is the one million bolivars, which is now 0.25 dollars. The local currency is so fragile that businesses sell their products in dollars, although sometimes they set the market exchange rate as the price in bolivars, based on the parallel market and not the official one. This fact has spread in popular areas of the country. Most payments are being made by credit card due to the low denomination of such local bills.

(Reuters) This week, the conflict over Northern Ireland's independence is back in the spotlight. On Wednesday, the United Kingdom demanded a new agreement with the European Union on post-Brexit trade monitoring, which was immediately rejected by Brussels. David Frost, Brexit minister, has stated that London is seeking to circumvent certain obligations at convenience, and Maros Sefcovic, vice president of the European Commission has been clear in stating that "we will not accept a renegotiation of the protocol and "respecting international legal obligations is of paramount importance". In essence, they require controls on goods between the two territories, as Northern Ireland essentially remains part of the EU customs area.

This fact, it seems, sticks in the City's craw, as do other issues such as the one we come to discuss today. (BBC) The hundreds of thousands of apartment owners who have "worthless" properties. In the early hours of June 14, 2017, Grenfell Tower, a social housing tower in the central Kensington neighborhood was consumed by flames with 72 deaths, including minors. How the fire spread and the standard protocol for evacuating residents from the fire proved to be a death trap. It was later discovered that the material was coated with government-approved flammable products. "Aluminum Composite Material or Aluminum Composite Material - ACN", is composed of two sheets of aluminum with polyethylene in the middle. These composites are present all over the country, even in buildings that were built 4 or 5 years ago. The government changed the regulations and overnight, with this legal change, buildings that were considered perfectly safe were now considered hazardous, and this change requires the replacement of all hazardous building cladding materials. These repairs are estimated to cost up to $100,000 per apartment.

The Cladding-Crisis (or Cladding Crisis), the way this crisis has been dubbed, has meant that apartment owners are stuck in an untenable situation, in potentially dangerous and unsellable apartments. The reason is that the entire whole building has to complete renovation and obtain an exterior wall safety certificate that was created in 2019. Without this certificate, banks will not grant mortgages to any buyer and consider properties that do not apply these renovations to be worthless as they are considered unsafe. Additionally, faced with the risk of fire, homeowners must pay more for their insurance. The key question in the conflict is who should bear the cost of the renovations?

In the United Kingdom (England and Wales especially), the legal peculiarity of the country is that the owners of the apartments are "LeaseHolders", they own their apartments, but not the land. The owner of the land is the "FreeHolder", usually an individual or company. The concept is that the owners of the apartments are the equivalent of very long-term tenants, being able to renew the licenses for more than 100 years. The landowner is in theory the one who should be responsible for the maintenance of the land and the building. And in this crisis, it appears that the cost of repairs will be passed on to the apartment owners, who may see their leases canceled if they do not pay. This has caused LeaseHolders to find themselves in an untenable situation. The builders and developers are dismissive of the issue as at the time the buildings were constructed they were legal materials. And it is highly unlikely that the inspectors who approved the buildings will be held responsible for the problem. More than 840,000 homes have been affected by this problem.

In response to this social pressure, Boris Johnson announced two weeks ago public funds of some $7 billion that will only cover a third of the work needed. They are only available for the tallest buildings considered most at risk. There are thousands of low-rise buildings, and in this case, the government has announced that it would offer very long-term loans, but this could condemn owners to decades-long debts or drastically reduce apartment prices if the debts remain attached to the property. One of the main criticisms of homeowners is that the government puts the interests of building owners and developers above their own. The conservative majority in parliament voted against a legal amendment supported by the opposition that would have prevented building owners from passing on these renovation costs to apartment owners. As it is, those who are suffering the impact of living in an unsafe place and potentially losing a lifetime's investment are the homeowners who do not know when or how much they will have to pay.

The philosopher and essayist, Dr. Antonio Escohotado in his 2018 conference "The Enemies of Reality", presenting the trilogy "The Enemies of Commerce", with its first volume published in 2008 and analyzes the phenomenon of the communist movement. This highlights the ideological debate of detail in an economic context, the evolution of parallel institutions such as the trade union, big business, property defended by copyright or the various social security systems and, he says: " Basically, We are in a commercial society".

The important point of this dissertation, which is an analysis of more than 2,500 years of history from ancient Greece, is that you cannot have prosperity until the ratio of slaves to patricians or freemen is greatly increased. When Athens took off commercially under Solon, there were few slaves, and to such an extent it had prospered materially, it was essentially a commercial society exporting oil, wine, and pottery. The sum of the people who felt poor or deprived should be less than the middle-class sector of society, which sought to prosper. That is to say, it was a social mobility fertilizer. In contrast, Sparta, a sublime military clerical society that survived four centuries of exploiting the Messenian people. Solon, the introducer of Timocracy, a form of government in which citizens with certain capital or property ruled, mentioned in Plato's "The Republic"; had its Spartan equivalent.

Ligurcus, the Legislator of Sparta, dissuaded his people from maintaining any commercial or industrial activity, prohibiting the use of the traditional Greek "fractional" currency created by Solon. He made impositions and prohibitions of development in terms of competitiveness, labor capacity, etc. This country became the canonization of heroism, of war, and the executioner of democracies. In the Peloponnesian War, it imposed itself on Athens and liquidated the cities of the democratic league. Today there are no democratic societies that are not commercial. And this one has a middle class that allows periodic elections.

With this summary of the history analyzed by the historian, I want to conclude that, as Quevedo would say, "words are like coins, that one is worth for many, as many are not worth for one". Paying affectionate homage to the outraged Economist, angry as the man and woman in the street, José María Gay de Liébana, (LaVanguardia) on July 14 after passing to a better life stated, "mortgages are increasing and it is normal that people want to have bigger houses, this means that areas that were not so populated before are becoming more attractive". Concerning the 55,000 million euros granted in loans, amid good market conditions in the mortgage market.

London is eliminating a large part of its middle class with the stroke of a pen, to turn its citizens into mere Messenian slaves who have had to pay their mortgage debts for centuries. It is circumventing their right to live unencumbered in a situation in which they have no responsibility whatsoever, other than the mere fact of being owners/long-term tenants of a property, and in which the builder should be responsible together with the owner of the land, the first interested party to have the space occupied and both co-responsible for the building as the commercial partners that they are.

Fortunately for Spaniards, this has not happened again since the asbestos crisis in Spain, and the rules taken were laxer because of the implications of solving a problem of such scale. If it were to happen today, surely this effect and decisions would have resulted in the same way, whoever was in government. Communist" behavior seems to be starting to become a trend that ignores the free market and its middle class.

With the increasing trend of investing in real estate in housing assets, beach apartments, parking spaces, and urban lots and plots, and the decreasing trend of investing in commercial premises, offices, and industrial buildings, one would think that most large funds are focusing on impoverishing the middle class through their lobbies, to get hold of these properties that otherwise would have been impossible to obtain, like Spartans taking what they want from the cities they conquer.

Gold (XAUUSD) this week has prepared support, for next week to take an uptrend ending at $1801.90. The range is at $1764, the support is given from the all-time highs of 2012. The news from the FED is expected to continue the expansionary movement, despite the inflationary measures. (infobae) Edward Montoya, senior market analyst at OANDA points out that the policy of both central banks on both sides of the Atlantic should positively affect gold in the long term.TD Securities has affirmed the persistence of gold's weakness against real yields, showing a vulnerable microstructure and its inability to rebound despite the current Risk-Off, highlighting that speculative flows remain particularly weak, reinforcing the potential for a deeper fall. Regarding silver (XAGUSD) rose 0.3% to $25.29 per ounce, palladium gained 1.8% to $2,700.77 and platinum advanced 0.9% to $1,089.30.

This week the Cryptos have been tinged with green, with Bitcoin (BTCUSD) at $33,945 up 4.54%, and Ethereum (ETHUSD) at $2,146 up 5.22%. In the ongoing blockchain efficiency war against Ethereum to take the second-best crypto spot, Cardano (ADA) has made a lot of moves. It has closed deals with the European government to develop what will be the digital euro and its CBDC. Cosmos, Solana, and Polkadot have the competing characteristics that have positioned them just behind Ethereum. Currently, the debate lies in the limelight of energy efficiency, and the shift to Proof of Stake (PoS) instead of the current Proof of Work (PoW). According to the University of Cambridge, it is estimated that current consumption is equivalent to the electricity consumption of a country like Ecuador, a country of 17 million inhabitants. And Bitcoin would be similar to that of Argentina. This week was held the event on bitcoin organized by Cathie Wood, "The B World", with speakers such as Jack Dorsey or Elon Musk. At the event, Wood has given important arguments on why Bitcoin matters in the context of deflation and not just inflation. Dorsey reiterated his company Square's commitment to helping improve Bitcoin's design, particularly in the context of self-custody. Elon has revealed that he owns BTC, ETH, and DOGE in his portfolio. This is the first time he has mentioned Ethereum, although he has expressed that his exposure to BTC is much greater than the other two. He has also revealed that SpaceX owns Bitcoins. He has explained the trajectory on the use of mining, and after its correction in energy consumption, Tesla will return to accepting BTC again. Binance Exchange has expressed its intention to list in the United States. On Wednesday, Glass node has communicated on Twitter that "whales" have been buying the fear, and have added +96,044 BTC to their assets in the last 3 weeks. In other words, it will go back up strongly.

?

Reports of an agreement by OPEC to promote demand have pushed WTI (USOIL) oil prices up to $72.07 a barrel, a small gain after Monday's 7.5% drop on the prospect of tight supply. Brent has ended at $74.20 with a similar drop. The week has started with a strong correction for both commodities, but they have ended up trading in positive territory.

?

?

?Happy Trading and Happy Friday!

#FED #BCE #NASDAQ #DOWJONES #IBEX35 #CAC40 #FTSE_MIB #FTSE_100 #EURUSD #GBPUSD # TWTR #FB #GOOGL # AKAM # David_Frost #Jerome_Powell # Maros_Sefcovic # Grenfell_Crisis #Cladding_Crisis # Antonio_Escohotado #Solon_Atens #Ligurco_Esparta #Platon_Republic # JM_GaydeLiebana # Edward_Montoya #OANDA # TDSecurities #USDXAU #USDXAG #CRYPTO #USDBTC #USDETH #TheBWorld #Cathie_Wood #Jack_Dorsey #Elon_Musk #POS_or_POW #DOGE #COSMOS #SOLANA #POLKADOT #BNB #Glassnode #BIGTECH #OPEP #OPEC+ #USDOIL #UKOIL #UKOIL

This article only expresses my opinion and under no circumstances represents an investment recommendation, but is merely an educational document.