February 2019 IceCap Global Outlook – In a normal functioning economy, banks do VERY well

IceCap Global outlook for the month of February 2019, titled, “The Surprise Party”

Investment Banking By Predictive Analytics

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Surprise!

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Q4 hedge fund letters, conference, scoops etc

They can be a lot of fun.

Your closest friends, family and loved ones become giddy with excitement of the thought and hope of springing the ultimate surprise on you during your very special day.

Appreciated only by the surprise planners is all of the work put into planning the perfect moment to make your heart race, your eyes widen and your smile stretch to maximum lengths.

Surprise parties can also produce an unwelcomed surprise.

These are the parties where the intended surprise is nothing like the actual surprise.

In the financial world today, nearly 40 years of continuously declining long-term interest rates, combined with 10 years of zero and negative interest rates, added to 10 years of money printing, 10 years of growing zombie banks and lifetimes of governments overspending, is very close to launching the ultimate surprise party.

The question of course – will it be a happy, champagne supernova party? Or will the party produce the ultimate financial surprise?

Understand, everyone in the world will be attending this party – you have no choice. And those who are smart and prepared will actually have a really nice time. Everyone else will not. February 2019 The Surprise Party US Dow Jones Industrial Average

Markets

Unless you’ve been off-grid, all investors know by now that recent market movements have been generating those eye-ball scratching, media-dreaming headlines emblazed with horrific words including CRASHING, DEVASTATING, and PLUMMETING.

With these headlines generated by real news networks, surely it must be true and it should give you a cause for concern.

However, as the brain works in different ways, sometimes it’s better to visualize these CRASHING, DEVASTING, and PLUMETTING markets.

Here’s a chart showing the US Dow Jones Industrial Average – we ask you to spot the CRASHING.

European Bank Stocks

No worries if you cannot see the CRASHING – we can’t see it either.

Hard to see…

Next, considering the US Federal Reserve completely reversed its course on interest rate hikes AND the government in Washington fought and bickered over the budget – then obviously the US Dollar should be crashing as well.

Here’s a chart showing the US Dollar – this time, we ask you to spot the DEVASTATION:

No worries if you cannot see the DEVASTATION – we can’t see it either.

European Bank Stocks

And then we have the hysteria created by the gold bulls – or gold bugs as they dislike to call each other.

In the minds of these shining investment experts, Gold Bullion is now surging higher than a kite and will once again (any day now) soar into the stratosphere.

Here’s a chart showing Gold – try to spot the SURGING and SOARING:

No worries if you cannot see this either.

European Bank Stocks

Don’t read headline news

So, just to be clear:

  • Stocks are not crashing
  • US Dollar is not plummeting
  • Gold is not surging

Naturally, we know these factual and truthful observations are hurting the feelings of many investors.

After all, we know of investment managers who have been completely out of the stock market for the last 6 years. And with stocks declining sharply on Christmas Eve – these managers were absolutely [prematurely] popping the cork.

Gold investors too have been taking it on the chin for a few years now. And every single time the shiny rock bounces from lower lows, it’s inevitable for them to email me with anecdotes over their investment precognitions. No doubt the current bounce convinced these investors too, to pop the corks over their recent success.

And then we have the single, most important investment in the world today – the USD.

And due to a myriad of reasons – it is also the most hated currency in the world. Seemingly every investment expert, novice and weekend warrior has developed a spectacularly strong dislike for the greenback. This dislike is borderline impractical, unhealthy and most importantly – unrealistic.

Seemingly everyone agreed - with stocks declining aggressively, with President Trump shutting down the federal government and not reaching any trade deals with China, and with the Federal Reserve putting a complete halt to interest rate hikes – the USD was about to hit the fan and splatter from sea to shining sea.

But it didn’t.

We like to remind investors that today’s financial markets have been overwhelmingly influenced, supported and simultaneously suppressed by 10 years of unorthodox, never-before-tried, and fantasy-like monetary policies by the world’s biggest central banks.

At IceCap we have consistently communicated that this environment has started to unravel, and the result will be a crisis across bonds, currencies and interest rates that will drive enormous amounts of foreign capital to seek safety in the USD.

THIS is why, despite the current sharp movements in many markets – the USD fails to crash as the majority expect.

Something else that catches our eye and should catch EVERYONE’S eye is the performance of European bank stocks.

Chart next page shows the performance of European bank stocks.

In a normal functioning economy, banks do VERY well.

European Bank Stocks

Read the full article here by IceCap Asset Management



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver