16# Signal 2 Noise

In today’s issue:

• New All-Time High’s

• China’s 5% target

S2N Updates

I spent almost the whole day yesterday mastering the quantstat Python library. I want to use this library more, but I needed to get into the source code to be able to take more control of the functions. I think it is mostly done, subscribers will get the benefit of more frequently updated and better analytics of performance.

Performance Review

It is not often that you see as many dark colours on the dashboards. I have to say the 5th of March was epic!

Economic News Today

New Signals

So much to say here but simply not ready yet.

S2N Insights

New All Time High’s (ATH)

Last week, the Nikkei made an all-time high after some 34 years of drawdown. The way the Nikkei index is calculated is not well known by most investors and has some very naive criteria, which no doubt influenced the drawdown period. Shares with a higher price carry more weight than ones with a lower price. This does not take market capitalisation into play and is pretty dumb. However, it is what it is. 

Not to be outdone, the DAX has also quietly made a new ATH. I don’t recall seeing anything in the media about this. 

Now for the really big news: Bitcoin hit a new high. Gold reached a new high.

Let’s begin with Bitcoin. After the ATH was made in late 2021, there was so much buzz, and then came the fallout, with many big names going into liquidation. I thought the drawdown would last many years, if not forever. In less than 2 years, with very little fanfare from the loud-mouth crypto punks, we are at new all-time highs. I believe the ETF legislation last year was the catalyst for some serious money coming into the space. However, the moves have become reminiscent of the previous Bitcoin bull runs, where HODL became part of everyone’s day-to-day language. We are experiencing 5–10% daily swings some days; that is a little too wild for a serious asset class.  I don’t believe the coming halving of Bitcoin at the end of the month has much to do with the love affair of Bitcoin. I must add that the chart below does not show the 9% sell-off that followed the new high.

To add one more comment, I could not be happier for Michael Saylor of MicroStrategy. He is the Bitcoin King with no rival. He has handled himself so well through both the good and the bad. This guy must wear extra-strength underpants. I have never seen a pair as big as his. He has my full admiration even if I think he is a little nuts.

With almost no fanfare. I am not sure how many people would know that Gold made a new high yesterday. There is so much to write about gold; it is quite impressive that it managed to make new highs with what seems like a lot of money rotating out of gold to bitcoin. The market is clearly worried about the budget deficits and the mountain of debt that needs to be financed.  I throw into the mix that Silver has been a significant laggard. Let’s keep an eye out, as this may be a massive divergence signal.

China’s 5% target

Yesterday, the Chinese bigshots had a major economic budget speech. I was quite impressed that they came clean and said the economy has slowed down significantly. I figure there is no way of hiding what is now pretty clear for all to see.

There was an analog drawn in the WSJ today between China and Japan of the late 80’s and 90’s with their balance sheet recession. While there are certain similarities, I don’t think they are directly comparable. China is an autocracy and will be able to spend a lot more than Japan was able to. The one thing I do think they have in common is a form of deflation, and I believe China is currently exporting a lot of deflation into the world.

This might be a reason to be watchful of gold. The future of gold is dependent on the way the US and the rest of the world handle their growing debt burdens.  More on this in the near future. 

The politburo has set a 5% GDP growth target for 2024. The days of China growing at the pace it has done over the last few decades are over, and the world’s second largest economy has to come to terms with a population that is shrinking and are not spenders like the west. They also need to cope with deflating property prices and the debt associated with financing the speculative boom in property development.

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