Category: Market Today

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Boeing shares fall faster than their jets

3 min read

The Boeing shares marked significant down since the March 10 crash.

One of its most profitable lines, the 737 Max 8 recorded the second crash of a 737 in less than five months.

Boeing (NYSE:BA) Co shares dropped by more than 2,2% early on Monday. It happened after a pair of newspaper reports asked more questions about the certification process for its 737 MAX jets before two recent fatal crashes.

A Wall Street Journal report on Sunday said that the U.S. Transportation Department was examining the Federal Aviation Administration’s (FAA) approval of the 737 MAX. In particular its anti-stall (MCAS) system.

According to “Refinitiv” data, Boeing shares have declined by about 10% since March 10. Accidents of its aircraft drained nearly $25 billion off its market capitalization.

Investors started selling Boeing shares Monday morning after the deadly crash of Ethiopian Airlines flight.

The stock dropped nearly 13% in trading since the crash.

It is obvious that Boeing is in crisis.

Is Boeing still a good investment?

Boeing has been one of the champions of the 10-year-old bull market. Boeing shares were higher more than 1,000% compared with a 315 percent increase of the Standard & Poor’s 500-stock index.

If you invested in Boeing 10 years ago, that arrangement has paid off.

For example, your $1,000 investment in 2009 is worth more than $14,000 as of March 15, 2019. That is a total return of over 1,000 percent. In the same period, the S&P 500 was up 270 percent. Say, your $1,000 would be worth just over $3,700, by contrast.

If you read our posts, you already know.

Any individual stock can over-perform or under-perform. Also, past returns can not foretell future results.

Boeing paused the delivery of 737 Max planes after the Ethiopian crash. It came less than five months after the previous deadly crash in Indonesia. Moreover, it was the same model.

The several major airlines said they would give up ticket-change fees and fare differences for those affected by the FAA’s grounding order.

Moreover, the flight-booking site Kayak also introduced a new search feature that allows users to exclude specific plane models.

We feel safer now, indeed.

The Boeing declared plans to roll out a software fix in the next several weeks.

The Boeing will take about 3-6 months to confirm the fix

However, Bank of America analyst Ronald Epstein said Thursday that the fix could take a longer: “Once Boeing identifies the issue … the most likely scenario is the company will take about 3-6 months to come up with and certify the fix,” he said in a note.

The truth is, airlines are still planning on flying these planes.

Boeing said in some comment it will “continue to build 737 Max airplanes while assessing how the situation, including potential capacity constraints, will impact our production system. ”

Last Monday, Boeing said it would expand a software upgrade to the 737 MAX 8, hours after the FAA said it would mandate “design changes” in the aircraft by April.

So, how to protect your investment?

The expert investor as Warren Buffett suggests you start with index funds. Index funds hold every stock in an index, they have low turnover rates, fees, and tax bills. They also shift with the market to reduce the risk of picking individual stocks.

Some people invest in individual stocks for excitement.

It can be a game, with emotions as volatile as prices of underlying stocks.

But are you sure you want to waste your time picking individual stocks?

Okay, maybe you really want to spend the time necessary to follow the market. How we can know what kind of character you are?

Maybe don’t mind the brokerage fees at all.

Oops, yes!

You have allocated the rest of your portfolio wisely to pad against possible losses.

The wide majority of investors invest in equities through funds, not individual stocks.

And you may be asking why.

Individual stocks are not easy.

Investing in individual stocks without the knowledge to perform fundamental analysis can cause you to jump in when at or near the zenith of the stock’s performance. If you found a stock in a list of “hot” stock tips, it is possible that its growth phase is at or near decline.

You should be careful.

Every time you make a decision to buy or sell, it will cost you commission fees. These fees can range from $4 to $30 or more.

And you should decide whether to make a transaction or not.

It is possible that you hold onto a stock far longer than you should in order to avoid the transaction costs. Right?

But you’re still settled to invest in individual stocks for profit, not for fun.

Then, try a stock screener.

A stock screener neither selects winning stocks nor keeps you focused on long-term goals. It does not make any real predictions or absolute judgments. It merely links to a data source based on the statistics you select.

If you really want a clever way to choose which stocks are performing well and which companies are currently robust and which ones are failing, stock screeners are a great place to start.

Don’t waste your money!

risk disclosure

18th March 2019
Investors are focused on Brexit

2 min read

Investors are focused on Brexit. The House of Commons of the UK should again start voting for the Brexit agreement, presented by Prime Minister, Theresa May. During the first vote, the Parliament rejected the Prime Minister’s deal. If the revote again fails, the events may develop in two scenarios: the UK will leave the EU without an agreement, or the Brexit date will be rescheduled.

But let see the risk of Brexit and the potential impact on the UK economy.

We also consider the likely reaction by markets for sterling, equities, and bonds.

We just want to inform investors.

The EU is the UK’s biggest trading partner.

But, the UK is also a very important export address for the EU. Brexit may bring the UK the freedom to arrange trade agreements with third parties. But it may have to lose access to parts of the single market, and would almost surely be outside the customs union.

Foreign direct investment is really important for financing the UK.

The UK has a strong connection to Europe and vice versa. If Brexit causes the UK to lose access to the single market, it could cause capital inflows to reverse. The existing stock of assets and liabilities is very large. Say that, this has a huge impact on markets in a confusing plot.

EU membership is frequently indicted the UK’s perceived migration problem

Truth is that most immigrants come from non-EU countries. From an economic viewpoint, EU migrants arrive ready to work, pay taxes, and ease the difficulties of an aging population. Limiting migration in a Brexit scenario would almost certainly lower the UK’s trend growth, and increase the burden on the exchequer.

The UK’s contribution to the EU’s budget is not a significant

When the UK decides to leave the EU, finally, with just 0.2% ( December 2018) of gross national income, that saving wouldn’t solve a dent in the UK’s fiscal black hole. Moreover, if the UK chooses to follow the path of Norway or Switzerland, some costs may also be required.

UK labor market will be less flexible

Restrictions on EU migration may cause the UK labor market to become less flexible to demand. With raising the likelihood of more pronounced wage, inflation and interest rate cycles. A more cyclical economy would not only make recessions more frequent, but international investors could demand a discount on UK assets given the higher volatility of expected returns.

A Brexit scenario is likely to cause sterling to fall further.

We are all witnesses to that.

Having already seen its first-class depreciation since the financial crisis in recent months, we can say that a further fall is likely under Brexit. But, the sterling could rebound should the UK vote to remain, as many investors have already started to hedge their sterling exposure.

The outlook for UK equities is mixed under Brexit.

The UK’s large-cap index has a large proportion of its revenues coming from outside both the UK and EU. If sterling depreciates, these companies may see the sterling value of profits rise. So, they would therefore benefit.

The mid and small-cap indices have more exposure to the UK and EU and could underperform as a result.

The outlook for bonds is mixed under Brexit.

Credits could have wider spreads. The investors demand a higher premium against the risk of lower growth and higher default risk. Meanwhile, gilts (Gilt-edged securities are bonds issued by the UK Government)are likely to see higher domestic demand from safe-haven flows.

The latest news: Ryanair UK investors to lose rights in no-deal Brexit

According to the Guardian, British citizens who own shares in Ryanair will be barred from buying more stock, voting on company resolutions or attending annual shareholder meetings if a no-deal Brexit goes ahead, the Dublin-based carrier said on Monday.

EU regulations require that airlines flying under a European license must be majority-owned and controlled by shareholders from the trading block.

Ryanair said that to comply with these regulations it would have to restrict the rights of British shareholders, who control about 20% of the company’s stock, to bring them into line with other non-EU investors.

In a statement to the stock market, Ryanair said: “These resolutions will remain in place until the board determines that the ownership and control of the company is no longer such that there is any risk to the airline licenses held by the company’s subsidiaries.”

Ryanair has previously published a guide to the ramifications of a hard Brexit for its UK shareholders, explaining its rationale for the decision and claiming it has no alternative.

Don’t waste your time.

risk disclosure

12th March 2019
BMW and Toyota could leave UK after no-deal Brexit

1 min read

Car producers Toyota and BMW have both warned that no-deal Brexit could affect on the production of their cars in the UK.

BMW told Sky News it could consider moving production of its Mini from the UK in a no-deal scenario.

Previously, the head of Toyota’s European operations said a negative result could put future investment at its UK factory at risk.

Company bosses lose trust in the UK economy because of Brexit uncertainty.

Toyota’s factory near Derby is at risk, said Johan van Zyl to the BBC, and added, if the Brexit “hurdles” are too high it would undermine Toyota’s competitiveness.

BMW has said it might stop making the Mini at its Cowley plant in the event of a no-deal Brexit. That would put more than 4,500 jobs and more than 100 years of car-making at the site at risk.

The German BMW joined Toyota and Vauxhall owner PSA in an attitude that an uncontrolled exit from the EU would cost British workers their jobs. And, the Geneva Motor Show (Thu, Mar 7, 2019 – Sun, Mar 17, 2019) is coming with the UK automotive sector under murky water.

No bridge over troubled water

BMW board member Peter Schwarzenbauer told Sky News that the future of the Mini brand in the UK was under threat in the deficiency of a Brexit deal.

By the way, he is responsible for the Mini and Rolls-Royce brands.

Also, he added, if a “worst case” no-deal scenario happened, “we would need to consider what it exactly means for us in the long run”.

“For Mini, this is really a danger,” he said.

Schwarzenbauer said the firm would “need to consider” moving production from the UK as the company could not absorb the extra costs they would inevitably face.

He also told the Reuters news agency at the Geneva car show that engine manufacturing, at Hams Hall in Birmingham, could be lost to Austria.

Previously, BMW chief executive Harold Krueger told the BBC that the carmaker was preparing “for a lot of scenarios” and was “very flexible” in its approach to production.

In the group with BMW is Toyota too

One of Toyota’s executives has warned a no-deal Brexit would make it “extremely complicated” to build new models at its British plants.

The signal by Japan’s biggest carmaker that no deal would make it less likely it would manufacture additional models in the UK follows Nissan’s recent reversal of a 2016 decision to build a sports utility vehicle in Sunderland and Honda’s planned Swindon closure.

It also comes against a backdrop of steep falls in investment in the UK car industry.

“If we don’t have access to the European market without a specific border tax, it seems to be extremely complicated to think about . . . introduction of another model,” Didier Leroy, chairman of Toyota’s European operations, said to the Financial Times.

Toyota has two factories in the UK, employing about 3,000 workers at its vehicle manufacturing plant in Burnaston and its engine production facility in Deeside in North Wales.

Where is the risk for the auto industry if scenario no-deal Brexit come true?

One risk of a no-deal Brexit is that British-made engines will no longer be counted as EU content.

These car giants could move some production of engines out of Britain if the country does not secure an orderly departure from the European Union.

Britain, the world’s fifth-largest economy, is due to leave the EU on March 29 but an agreement between London and Brussels has been rejected by UK lawmakers leaving open the possibility of a chaotic exit that could hit trade.

What is the possible scenario?

March 12, 2019: UK lawmakers will vote on new deal terms of the UK’s departure from the EU.

March 13, 2019: In case the deal is rejected, lawmakers will vote on whether to leave the EU with no-deal.

March 14, 2019: If lawmakers reject a no-deal Brexit, they will probably seek a delay to the U.K’s separation from the EU.

March 15, 2019: Two-day summit will start. EU leaders will meet to analyze the state of the Brexit process.

March 21, 2019: The UK is listed to leave the EU.

The bottom line

The fact is, this is the battle of nerves. In light of the possibility that BMW and Toyota, along with other investors who proclaimed that will leave the UK, the economy of Great Britain could drop hard. The state of suspense will not stay so long. The date of decision is so close.

Don’t waste your money!

risk disclosure

5th March 2019
Euro – Is it Going to Die?

4 min read

From 27 January 2019, 17 of the 19 national central banks in the euro area is no longer issue €500 banknotes. In order to ensure a smooth transition and for logistical reasons, the Deutsche Bundesbank and the Oesterreichische Nationalbank will continue issuing the notes until 26 April 2019.

Existing €500 banknotes will continue to be legal tender, so you can still use them as a means of payment and store of value (i.e. spend and save them). Similarly, banks, bureaux de change and other commercial parties can keep recirculating the existing €500 notes.

Like all denominations of euro banknotes, the €500 note will always retain its value and can be exchanged at a national central bank of the euro area at any time.

To be charitable, you could say the euro has proved itself merely by surviving until its 20th birthday this January.
That is a low bar.

Some politicians and economists would say that the European monetary union has failed as an economic and political endeavor.

The evidence of Europe’s ‘Lost Decade’ is that it can only ever be made to work under a regime of technocrats.
That is to say, nation-state elected parliaments, was cleared out of their control over taxation, spending, and the core economic policies.

“One day, the house of cards will collapse,” says Professor Otmar Issing, the founding chief economist of the European Central Bank.

The EMU adventure has led to the “most serious economic crisis in the history of the European Union, said the others. It has done “more lasting damage” to Europe than the Great Depression of the 1930s and put eurozone states against each other. All of them are fighting for control over the policy.

With 2019 beginning, the leading EU economists analyze the bloc’s single currency the EU. Which they argue has caused more harm than good.

The political dynamics have become poisonous. Years of rolling crisis “entrenched and amplified the power and influence of creditor countries such as Germany”, working through the ECB and the European Council.

EU bodies enforcers of a German-imposed strategy of debt deflation and fiscal contraction. The responsibility of adjustment fell on the weaker states. That was leading to a bias for the whole system.

Yet nothing is actually changing.

There is no attempting to probe the disaster

Those in power of the EU still think they were right. Everything is about ideology.

One of the aspects of the present situation is disappointment with the “European Dream”. The belief that policies preferring concepts like community relationships, sustainable development, and international cooperation would give Europeans an advantageous lifestyle and influence in the world, collapsed. Europe, particularly as the idea of the European Union, is no longer the object of dreams. It becomes a cause of concern and even fear. And the euro carries part of the guilt for this shift of perspective.

The common currency was put into place in 2002, by 19 of the 28 EU member states. But the growth in eurozone countries has been inferior compared with countries that did not join the monetary union. Notably, the United Kingdom, Norway, and Sweden showed more progress. This aspect is important to understand the public disappointment with the EU. People couldn’t see the realization of the promise declared at the time of the euro’s launch.

Today, most Europeans are assured that the common currency has negative impacts on their economy.

Most of the countries have low growth but rising unemployment

So it looks that the eurozone is in the middle of the crisis. The basic problems first posed isn’t resolved.

For example, the unitary currency system locks the relative exchange rates between countries.

For a stable economy, it is necessary to have the possibility to adjust exchange rates. Moreover, there is no such thing as a true European budget. Without exchange rate adjustments or budget transfers, it is left to the labor market. Therefore salaries have a negative effect on the hunt for budget balance.

What is clear is that the status quo cannot persist indefinitely if the Euro is to survive in the long term.

The Brexit devastated EU economic capability

Truth is, youth jobless rates reached 57% in Greece, 56% in Spain, and much the same across Italy. These levels are illogical in a modern developed democracy.

Hundred thousand economic refugees came to work in Britain. From Eastern Europe came to the UK instead of going to the eurozone as they did before. The wave had a great impact before the Referendum UK.

EU budget talks for 2019 collapsed

The last year’s negotiations between the Council of the EU and the European Parliament for the 2019 budget failed to reach a compromise by the legal deadline. Later in December, they made the deal.

But Europe’s economy is weakening. It would not have said the recession was imminent but the article by economist Victor Hill connects some events in directions many haven’t considered.

Hill begins the article this way.

”Across Europe, and particularly in the 18-member Eurozone, the economic news is sobering. It’s now clear that the credit crunch in emerging markets which has played out over most of this year, plus the slowdown in China, are having negative consequences in Europe. Yet, despite the ongoing trauma of Brexit, the UK is cruising along relatively smoothly—for now.”

The first such event is the coming end of the European Central Bank’s quantitative easing “Asset Purchasing Programme.”

The ECB has been buying bonds, stocks, and anything else that isn’t nailed down wholesale.

Asset prices have gone up

Mario Draghi and his team borrowed the US Federal Reserve’s plan and made it more insane. Since 2017, they have been stepping down purchases. The step should reach zero in early this year.

The EU needs a growing core to stimulate growth for the whole continent.

Where the EU has made practically zero progress is crisis prevention. In some areas, they are even growing back.

The politics have gotten worse. The price to pay for those bailouts, reform packages, rescue funds, and European Central Bank bond-buying schemes has been political fragmentation, at first. But by now, this becomes outright polarization. And this is happening in both “core” and “periphery countries”.

The eurozone still relies on the European Central Bank to hold everything together. And instead of a treasury, they have a politically unstable consensus on the need for the ECB to act as a lender of last resort for governments.

Policymakers need to support the ECB. But the eurozone will not be able to avoid a discussion on better fiscal alternatives forever.

The eurozone is still dangerously imbalanced

The size of the northern countries’ account surplus is an obvious symptom of the basic differences. It will need to rebalance to solve the problem.

And moreover, there is the weak governance of some parts of Southern Europe. This will be very difficult to support politically.

The current state of the global economy is like to be the crash. There are unsolved problems everywhere. There’s the Brexit issue, Italy’s populists, the US-China trade conflict and a lot more. The bad news everywhere.

The defenders of the euro at the European Central Bank (ECB) sit in Mario Draghi’s trap of a zero-interest policy. The bank president’s inaction could prepare the territory for the next big crisis.

The world’s largest asset management firm, BlackRock, is warning its clients against investing in European stocks. They are saying the risks of doing so are too high and that the bullish period is most likely over on the Continent. There’s the concern, seeing investors increasingly putting resources into US sovereign bonds in pursuit of safe yield.

And it’s a warning signal when yields on longer-term bonds are lower than those on bonds with a shorter maturity.

Such an inverse yield curve could be an indication of a downturn

Today’s debt is higher than before the global financial crisis, amounting to 225% of global GDP (according to the IMF) or 245% (according to the Bank for International Settlements). The eurozone stipulates its members must not let their debt exceed 60% of GDP. But, global debt is rising faster than growth.

The bottom line

What does this mean?

This means that the economic growth we’ve seen in the past years has been achieved on credit.

When the bubble explodes all will have to tighten their belts. Some nations will no longer be able to take the multibillion-dollar rescue packages. And the ECB’s Mario Draghi cannot lower the lender’s interest rates to lever up the economy.

The ineluctable conclusion is that a monetary union of budgetary sovereign states cannot be made to work.

The euro is essentially unsustainable. And, therefore, it is going to die.

risk disclosure

25th February 2019
Euro to Decrease in Days Ahead – Forecast

2 min read

The downward trend, resistance, and price action combine indicate EUR/USD will be lower in the week ahead. If we are right, first up will be the new low at 1.1234. The last low was in November at 1.1216.

If we see how the rate things have been going recently, it could be a extend. We see an extended slide too far beyond either of those levels without another bounce.

EUR/USD

In the week ahead EUR to USD :

Forecast euro on Monday, March, 4: exchange rate 1.1346 Dollars, maximum 1.1516, minimum 1.1176.

EUR/USD forecast on Tuesday, March, 5: exchange rate 1.1383 Dollars, maximum 1.1554, minimum 1.1212.

EUR to USD forecast on Wednesday, March, 6: exchange rate 1.1309 Dollars, maximum 1.1479, minimum 1.1139.

EUR/USD forecast on Thursday, March, 7: exchange rate 1.1365 Dollars, maximum 1.1535, minimum 1.1195.

EUR to USD forecast on Friday, March, 8: exchange rate 1.1324 Dollars, maximum 1.1494, minimum 1.1154.

The Euro rallied a bit during the last week, breaking above the top of the hammer from the previous week. This is a very positive sign as the hammer set itself up right at the 1.1250 level, an area that has been very important, and it reliably supportive over the last several months. Beyond that, it was an area that was previous resistance that seems to be holding as well.

EUR/USD

When you look at the longer-term chart, we are also trading just above the 61.8% Fibonacci retracement level, and therefore there are plenty of reasons to think that the pair is going to rally. However, the 1.15 level above has been very resistive so this will simply be a continuation of the overall consolidation area. Honestly, this is a bit of a basing pattern but it’s going to take some time to play itself out. With the Federal Reserve looking to be very dovish, it makes sense that the greenback would lose some strength.

The European Union releasing shocking economic numbers, giving the US dollar a bit of a break.

If there will be breaking down below the 1.1250 level, then it will continue to drive. That’s a very supportive level though, it is very unlikely to happen. This is going to be more of a struggle than anything else.

Euro and the US dollar are the most traded currency pair

The most traded currency pairs in the world are called “the Majors” and the EUR/USD leads this group as the most traded pair in the world. This pair represents the world two largest economies and has faced the most volatility since the inception of the euro in 1999.

The common European currency was introduced in 1999. Euro currency in cash entered into circulation 3 years later – in 2002. Before that, the non-cash Euro and German marks, French francs, and other European currencies in cash were in circulation simultaneously.

The bottom line

When introducing the Euro in January 1999, the European Central Bank fixed its exchange rate against the US Dollar as 1.1743 dollars for 1 Euro. Such relation to Dollar was formed by the Euro predecessor – European currency ECU. The name Euro seemed more harmonious to Europeans than ECU.

The exchange rate of the Euro against Dollar mainly depends on the rate of return (interest rates) in these currencies.

risk disclosure

24th February 2019
Bitcoin rise comes from fiat

1 min read

Bitcoin, Ethereum, Litecoin, and EOS have all experienced an unexpected rally in the last seven days.

Bitcoin is up 9.84%, Ethereum is up 21.24%, Litecoin is up 23.13%, and EOS is up 35.72%

This shows that the rally has strength. It looks that fresh money is flowing into the entire area.

“Interestingly, it appears that the momentum behind the recent Bitcoin rise comes more from fiat and stable coins than from other cryptocurrencies,” says Michael Noel, CEO Blockchain Consultants. “This move from Fiat currencies shows at least some consensus that BTC value, is better long term than in traditional currencies.”

BTC/USD

BTC/EUR

BTC price – 2/22/2019

The last bull flag had a golden cross and this is the main reason why Bitcoin plummeted.

It seems the Bitcoin rise comes from fiat

This new support of over $3,900 looks strong. More money is coming into the market and people want gains like it was in 2017. Fear of missing out is another factor why people will buy BTC. Many claims there is still a bear market but they can’t confirm when will it hit a bottom. It looks that BTC will be fluctuating between $3700 – $6,000 for a long period.

Bitcoin price plunge to $3,700 expected, the traders say. A retreat is a blessing for crypto.

Following a rapid surge in the Bitcoin price from $3,614 to $4,000 within a span of three days, traders are expecting BTC to retrace by around 7 percent to $3,700.

The projection on the price trend of the ruling crypto asset comes after the failure of Bitcoin to climb beyond the crucial $4,000 resistance level.

On February 19, it achieved $4,000 across major crypto exchanges including Bitstamp and Binance. But soon, it fell to the low $3,900 region and today, below the $3,900 level.

The price trend of Bitcoin in the past four days is similar to its trend from February 8 to February 12.

In early February, in a frame of four days, the price of BTC surged from $3,337 to $3,711 and pulled back to the $3,500 region.

In the upcoming days, traders foresee Bitcoin demonstrating a similar movement as before.

The bottom line

The near-term minor correction of Bitcoin could positively affect the trend of the crypto market in the next weeks. We can see more stability and a strong spot to begin short-term rallies.

BTC showed an expansive period of stability and initiated a strong rally to $4,000.

If the asset regains momentum in the upcoming days and potentially establishes a strong floor to cleanly break out of the critical $4,000 resistance level, it may benefit the market.

CCN reported that economist Alex Krüger stated that although $3,700 remains as a strong support level, breaking out of the

$4,200 resistance level could trigger a rapid upside movement.

The explanation for the short-term prosperity of the crypto market is for Bitcoin to break out of major resistance levels with strength.

The daily volume of the market has largely recovered. And the interested in the asset class has significantly increased. So, we will see. Bitcoin looks stronger than some expects.

risk disclosure

22nd February 2019
Danske Bank Closed Branch in Estonia – Money Laundering Scandal Saga

1 min read

Danske Bank in Tallinn, Estonia

Estonia ordered Danske Bank to close its local branch within months on Tuesday.

Danish and Estonian regulators faced an EU investigation into their efforts to prevent one of the largest money laundering scandals ever.

Danske Bank’s Estonian branch was found to have helped funnel some 200 billion euros ($226 billion) in suspicious payments from Russia, ex-Soviet states and elsewhere.

According to OCCRP (Organized Crime and Corruption Reporting Project), Danske Bank Estonia is already implicated in other money-laundering schemes, involving billions of dollars from Azerbaijan flowing through the branch, some of which ended up in the pockets of European politicians who praised the Baku regime, a chronic human rights abuser.

Another investigation, the Russian Laundromat, revealed that US $20–80 billion was moved out of Russia through a network of global banks, including Danske.

Danske Bank Estonia is already implicated in other money-laundering schemes, involving billions of dollars from Azerbaijan flowing through the branch.

This ultimatum was made public as Danish and Estonian regulators found on Tuesday they are being investigated by the European Union’s own banking watchdog.

Laundry and run

The Danish bank is being investigated in Estonia, the US, Denmark, the UK, and France for handling billions of dollars that flowed through its Estonian branch on behalf of non-residents from Russia and other former Soviet states between 2007 and 2015.

One of the banks mentioned was the little-known Promsberbank, based near Moscow, that lost its license in 2015. Promsberbank collapsed in 2016 after it transpired that some three billion roubles had disappeared from its accounts.

One of Promsberbank’s board members was Vladimir Putin’s cousin, Igor Putin. It looks he was involved in the Russian Laundromat scheme.

The Danske Bank case focuses on money moved between 2007 and 2015. The questions about the supervision of the Danish bank were raised, prompting the EU’s executive European Commission to ask the European Banking Authority (EBA) to investigate.

The EBA’s investigation will take two months, and if it finds a breach of EU law, it can make recommendations to the two regulators to address failings.

Danske Bank is not alone

Swedish television said it had uncovered documents connecting the bank to suspicious transactions with Danske in Estonia.
And Swedbank defended its money laundering rules and controls.

Swedbank spokesman Gabriel Francke Rodau said that fighting money laundering was one of Swedbank’s highest priorities.

“We are comfortable with the systems and processes we have to prevent and avert money laundering. When we get signals, we act,” he said.

The Swedish TV (SVT) said that transactions by 50 of Swedbank’s clients should have raised red flags as they were companies with no visible operations, had unknown beneficial owners or were represented by suspected “goalkeepers”, people who only provide a front for an organization.

“The investigation covers more than 1,000 of Swedbank’s clients in high-risk countries who are known from the money laundering scandal in Danske Bank,” SVT states on its website.

The bottom line

So, as we can see, criminals don’t need bitcoin to launder money.
Traditional banks and fiat are good enough for that.

risk disclosure

20th February 2019
Swedish Krona set on volatile January Inflation

2 min read

February 18, 2019
The Swedish krona is the worst-performing significant currency this year. It faced volatility on Swedish inflation data Tuesday. It looks the markets may be underestimating the risk for a surprise.

According to SEB AB January is the month of the year with the most volatile inflation data. But a check of one-week price fluctuations in the euro-krona exchange rate implies traders are relatively satisfied.

One-week implied volatility in the cross is trading around 50 basis points below its one-year average. The relative premium to own exposure to short-term risks stands below par. That suggests investors can hedge themselves through insignificantly under-priced option plays.

The Swedish krona has been damaged this year by doubt that the country’s central bank can stick to a plan to hike interest rates in the second half of the year. Karl Steiner, a strategist at SEB said that Inflation is the second-biggest driver for the krona among Swedish data and events, after Riksbank policy announcements.

“Stars seem to be aligning for out-sized moves in the krona considering the event risks that lie ahead,’’ said Fredrik Lockne, an options specialist at SEB. “Implicit volatility looks rather cheap, in particular over the two-week tenor which captures both inflation and growth data.’’

January data has the obvious inclination for downside surprises in headline inflation, at 71 percent of the time over the past seven years, SEB said. Swedish consumer prices are forecast to have dropped 0.7 percent in January on a monthly basis, from a 0.4 percent rise in December, as many stores cut prices after Christmas holidays. Inflation is forecast at 2.2 percent in annual terms, versus 2.0 percent in December.

Image source Bloomberg: Swedish krona

Best Exchange Rate: 10.6955 on 29/08/2018
Worst Exchange Rate: 0 on 18/02/2019
Mid Exchange Rate: 10.3044 on 17/07/2018

Other currencies:

EUR/USD

The trend is bearish in the 1-hour chart. Intraday resistance is at 1.1341 price level. This means, as long as the price stays below 1.1341 resistance level, you should look for sell trades. If bullish candlestick closes above 1.1341 critical resistance level, then down trend is going to end.

GBP/USD

The trend is bearish in the 1-hour chart. Intraday resistance is at 1.2995 price level. As long as the price stays below 1.2995 resistance level, you should look for sell trades. If bullish candlestick closes above 1.2995 resistance level, which stands as critical, then down trend is going to end.

USD/JPY

The trend is bullish in the 1-hour chart. Intraday support is at 110.08 price level. As long as the price stays above 110.08 support level, you should look for buy trades. If bearish candlestick closes below 110.08 critical support level, then up trend is going to end.

USD/CAD

The trend is bullish in the 1-hour chart. Intraday support is at 1.3195 price level. So, as long as the price stays above 1.3195 support level, look for buy trades. If bearish candlestick closes below 1.3195 critical support level, then up trend is going to end.

USD/CHF

The trend is bearish in the 1-hour chart. Intraday resistance is present at 1.0110 price level. So, as long as the price stays below 1.0110 resistance level, look for sell trades. If bullish candlestick closes above 1.0110 critical resistance level, then down trend is going to end.

risk disclosure

18th February 2019
Wild ride: Dow Jones Rise 250 Points
2 min read

Stocks rose on Friday amid increasing hopes for a U.S.-China trade deal as equities were on pace to post another solid weekly gain.

According to CNBC, The Dow Jones Industrial Average jumped 250 points as J.P. Morgan Chase and Caterpillar outperformed. The S&P 500 gained 0.76 percent, led by financials and tech. The Nasdaq Composite advanced 0.4 percent.

The 30-stock Dow and Nasdaq were both on pace to post their eighth consecutive weekly gain. The S&P 500, meanwhile, was on track for its seventh weekly gain in eight. The indexes were all up more than 1 percent entering Friday’s session.

Here are the hottest things to know about stocks
- The Dow Jones Industrial Average, S&P 500 and Nasdaq posted their fourth straight day of gains.
- The Dow has added more than 1,000 points from Friday to Wednesday.
- Big gainers on Wednesday included Chipotle Mexican Grill, Fossil Group and Nektar Therapeutics.
- The Consumer Price Index rose 0.5% in January, the strongest monthly increase since January 2017.
- The 10-year Treasury note hit 2.91%, a four-year high.
Stocks ended with sharp gains on Wednesday, February 14, after falling earlier in the session following reading on U.S. consumer inflation.

The Dow Jones jumped

The Dow Jones Industrial Average jumped 253 points or 1.03%. The S&P 500 rose 1.34% and the Nasdaq was up 1.86% as technology shares outperformed.

The leading gainers on the Dow Wednesday were Nike Inc. (NKE – Get Report), Cisco Systems Inc. (CSCO – Get Report) and JPMorgan Chase & Co. (JPM – Get Report). They rose 3%, 2% and 2.3%, respectively.

Daniel Deming, managing director at KKM Financial said: “I am a bit surprised the market has been able to maintain this upward trajectory at the level that it has… We had a little hiccup last week, but that was quickly priced out of the market. That tells me there is still money trying to seek a higher return, or at least take on more risk.”

What did cause this Dow Jones jump

Chinese President Xi Jinping said trade talks between the U.S. and China will continue next week in Washington. This comes after a U.S. trade delegation which was led by Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer visited Beijing this week.

China and the U.S. are trying to hit a deal before a March deadline. If they don’t reach a deal by then, additional U.S. tariffs on Chinese goods could take effect. President Donald Trump, still, is considering pushing back the deadline by 60 days to give negotiators more time to reach a deal.

Core inflation in the US in January rose 0.3%.

Wall Street will be looking to the data to help it gain signs about the pace and trajectory of interest rate hikes from the Federal Reserve.

“This is a strong number. What’s going to be interesting is how financial markets react,” said Luke Bartholomew, investment strategist at Aberdeen Standard Investments.

“There’s a risk that this could pour fuel on the fire of last week’s market selloff.”

Bartholomew added that the “Fed is now very likely to follow through on its plan to raise rates again in March.”

The 10-year Treasury note yield rose to 2.91% on Wednesday, a four-year high.

The Cboe’s Volatility Index often referred to as the “fear gauge,” fell back below 20.

U.S. retail sales in January fell 0.3%, but economists had expected a gain of 0.2%. It looks like a not good hint.

The Friday moves come after the Dow and S&P 500 fell on much weaker-than-forecast retail sales numbers.

On the data front Friday, industrial production for January fell 0.6 percent. Economists, however, expected an increase of 0.3 percent. They failed once more.

Consumer sentiment data are scheduled for release later on Friday.

risk disclosure
15th February 2019
Nasdaq’s loophole in rules is under investigation

2 min read

According to The Wall Street Journal, Nasdaq’s loophole in rules is under scrutiny after a roller-coaster ride in the stock of one small company highlighted how firms can go public without ample shares to trade.

So, what happened?

Phunware Inc., a software company preparing to launch its own cryptocurrency, climbed about 3,750% over six trading days to hit an intraday high of $550 a share on January 10. Only 144,000 shares were eligible to freely trade during that period, according to the company. The stock closed at $113.41 on Tuesday.

Nasdaq’s loophole in the rules

Nasdaq’s rules require companies listed on the exchange to have at least one million publicly held shares. The problem is that can incorporate shares which are restricted from trading. Such shares are those owned by employees or early investors who may be required to hold the stock for a period before selling.

The important fact is that Phunware, Inc. has not issued dividends in more than one year.

The important fact is that Phunware Inc. has not issued dividends in more than one year.

Their stock has been volatile due to the small supply of shares that can be freely traded.

Take a look at the chart below.

Image: screenshots from Finance Yahoo

As soon as this week, Nasdaq will move to close the loophole by proposing to exclude restricted shares from the number that firms need to qualify for a listing, according to Nasdaq spokesman Joe Christinat. The Securities and Exchange Commission would need to approve the rule change.

What really is Nasdaq’s loophole

Shares of Phunware (NASDAQ: PHUN) rose 1,988% higher in January, according to data from S&P Global Market Intelligence. The provider of development tools for mobile apps, including a unique blockchain-based security token known as PhunCoin, started the month as a penny stock with a $310 million market cap.

By the end of January, Phunware’s stock closed at nearly $300 per share and a total market value of $9 billion.

Image: screenshots from Finance Yahoo

The surge started with Phunware establishing its merger with capital investment firm Stellar Acquisition III. The deal led Phunware onto the public markets after a decade of operations as a private company. During the period of two and a half years, they were collecting funds of Stellar Acquisition’s capital to use without a clear purpose.

Actually, Phunware went public through an unusual backdoor combination.

Blank-check company

The Austin-based company merged with a blank-check company that already had a listing on the Nasdaq. Blank-check companies, they are also called special purpose acquisition companies, or SPACs. Their purpose is to raise money from public investors with the goal of using the proceeds to acquire an existing business. The arrangement has gained recognition in the past several years, and Nasdaq is the most popular exchange for blank-check listings.

Share prices continued to soar as Phunware announced a handful of new patents and developer programs. That programs topped off by a launch platform for a public version of PhunCoin and a blockchain partnership with the powerful IBM.
The stock has settled down a bit in February and is now trading just 752% higher since the new year.

The rule change needs approval

Nasdaq’s loophole has to be closed. The Securities and Exchange Commission would need to approve the rule change. “It shows a need for rethinking these rules,” said James Angel, a finance professor at Georgetown University whose research focuses on securities markets, in his statement for The Wall Street Journal. “We need to have enough shares in public circulation so we don’t have dislocations like we have seen here with Phunware.”

Phunware recorded revenue of $19.1m and a net loss of $2.6m during the six months ended June 30, 2018. But, Phunware lost $25.9m in 2017. Before the merger, its auditor, Marcum, said that there was “substantial doubt” about its ability to remain solvent.

Phunware is not a unique case.

Some other lightly traded stocks that emerged from deals with Nasdaq-listed blank-check companies have also experienced wild price swings.

Organogenesis Holdings, a developer of surgical and sports medicine products, resumed trading January 8 after merging with a SPAC late last year. The stock opened the following day at $15.60 a share and rose to an intraday high of $310.90 before closing at $82.35. Just 28,209 shares changed hands that day, according to FactSet.

A large portion of Organogenesis’ shares was restricted and unavailable for immediate trading after the company’s merger with Avista Healthcare Public Acquisition.

About 4 million Organogenesis shares were unrestricted on Jan. 8. Since then the number has risen to approximately 19 million, said Organogenesis spokeswoman, but she declined to comment on trading activity in the company’s stock.

The market is still getting excited about crypto

Phunware’s surge is proof positive that the market still can get excited about blockchain tools and cryptocurrency stocks. But we don’t have any actual business results available for this company yet. Is it an empty bubble with zero long-term value.? Or are we are witnesses of a future titan in the mobile app development market? Only time will tell. It is smart to stay on the sidelines until we know more about the new company’s business plans.

The bottom line

Truth is that blank-cheque companies are risky for investors because of their lack of operating history. But they are charming to exchanges, which compete for SPAC initial public offerings. About two years ago Nasdaq proposed to correct its rules to make it easier for blank-check companies to list on the exchange. But, facing shaded examples, Nasdaq ended up withdrawing the proposal last year.

Phunware, together with its managers and early investors, are now preparing to make available an additional 21 million shares, which would significantly increase the float of the stock, according to a regulatory filing made on February 5.

risk disclosure

14th February 2019