Financial encyclopedia

2024-06-04

The market expects that the European Central Bank will announce a rate cut at the monetary policy meeting on Thursday (6th), which will lead the euro zone to a different policy path from the United States, and the global interest rate path or differences will have some important economic impacts: fluctuations in exchange Interest rate cuts in the euro zone will devalue the euro against the US dollar, because lower interest rates reduce investors' demand for the euro. The relative appreciation of the dollar may make American goods more expensive for countries that use the dollar for international trade. capital flow Investors will tend to transfer funds from the euro zone with lower interest rates to the United States with higher interest rates to obtain higher returns. This will lead to capital outflow from the euro zone, while the United States will attract more foreign capital. trade balance The depreciation of the euro makes the export goods of the euro zone relatively cheap, which may enhance its export competitiveness. On the contrary, American exports have become relatively expensive and may weaken American exports. Inflation and economic growth Interest rate cuts in the euro zone may trigger the risk of rising inflation. If the United States maintains a high interest rate, it may curb inflation, but it may also slow down economic growth. Global market impact Global markets will pay close attention to these policy differences, because they will affect global capital flows and trade patterns. The change of investors' risk preference will affect the performance of global stock market and bond market.

2024-05-28

Price Action refers to all the contents such as the trend of asset prices. Many investors will analyze the price changes on the chart through price behavior to gain a deeper understanding of the potential market dynamics. Trading method of price behavior: Investors only need to make trading decisions according to the price chart, and use basic technical analysis tools such as resistance support, yin-yang candle shape and chart shape to pay attention to price changes, without complicated indicators to capture trading signals and predict market trends. Benefits of price behavior: simple Simplify the analysis and trading process, investors can make trading decisions through basic technical analysis tools without complicated and chaotic indicators, and can concentrate on analyzing, observing and looking for better trading signals. Easy to learn and implement Novices are easier to learn and implement, thus increasing their chances of entering the market. In addition, the simplicity of this method reduces the possibility of analysis errors so that more accurate trading decisions can be made. No lag Different from the traditional technical indicators, it has the advantage of no lag. Traders can quickly observe market trends and react quickly, thus creating opportunities to seize the wave. Investor-led trading Use investors' analytical and critical thinking skills to make wise trading decisions instead of relying on pre-programmed indicators. Deficiencies in price behavior: It is easy to be subjective and may lead investors to hold different interpretations. Although it has many advantages, it is not a perfect method and may not work in all market conditions. In addition, because it relies on investors for analysis and decision-making, it cannot be fully automated.

2024-05-21

The scarcity of bitcoin has always been the focus of market speculation. Investors believe that as long as there is demand in the market, the price will rise indefinitely. Bitcoin was halved last month. In the past, every halving was regarded as a catalyst for price increase. In 2012, 2016 and 2020, the highs before and after halving were 93 times, 30 times and 8 times respectively. However, in the past, the price did not rise immediately after halving, and sometimes it even adjusted for a period of time, and the price fluctuated greatly. What is halving? Since the advent of Bitcoin in 2009, it has experienced four times of "halving". The so-called "halving" means that miners get "halving" the rewards through mining. Every time the bitcoin blockchain generates 210,000 blocks, the bitcoin block reward will be halved, which happens once every four years. At present, miners get 3.125 bitcoin prizes for every block dug up until the upper limit of 21 million bitcoin blocks is fully exploited, and the process of halving will end, which is expected to appear in 2140. Sources of scarcity The supply of bitcoin is limited to 21 million pieces to ensure that its supply is strictly controlled, which is in sharp contrast to the unlimited issuance of legal tender, and the mining reward has been halved, and the number and the end of mining have a certain time. Bitcoin uses asymmetric encryption, and holders need to use private keys to access their assets. If the private keys are lost, forgotten or the holders die, these bitcoins will never be retrieved, thus further reducing the number of bitcoins in circulation.  

2024-05-14

Us data raises fears of stagflation: GDP and jobs data lag First-quarter GDP grew at an annualized rate of 1.6 percent, less than half the previous quarter's 3.4 percent pace. Nonfarm payrolls rose 175,000 in April, well below expectations that the unemployment rate rose to 3.9%. Inflation of CPI and PCE The CPI rose at an annual rate of 3.5% in March, higher than expectations of 3.4% and higher than the previous reading of 3.2%. The PCE price index, which rose 3.7 percent in the first quarter, is well above the Fed's 2 percent inflation target. The chief executive of jpmorgan Chase warned earlier that the stagflation crisis of the 1970s could return and investors should brace for interest rates to rise to 8 percent. Ubs analysts also believe the United States is at risk of stagflation. What is stagflation? stagflation is when the economy stagnates or even declines while high inflation persists. When recession and inflation occur at the same time central banks are caught in a dilemma: pumping money into the economy will drive up inflation; Income pressure inflation will worsen the recession business closures and unemployment will soar. The impact of stagflation on the market? As inflation increases the cost of goods and services, thereby reducing consumers' purchasing power and negatively impacting corporate profits and consumer spending, stagflation tends to cause stock prices to fall. Stagflation, on the other hand, is good for commodities such as gold or silver because they are often seen as a hedge against inflation. These commodities offer potential opportunities for traders when inflation rises.

2024-05-07

Over the past weekend, the annual Buffett shareholders' meeting ended, and tens of thousands of investors gathered to listen to Buffett's market views, investment strategies and philosophy of life. What did the stock god say this year? Talking about apples At the end of 2024, Apple is likely to remain the largest single stock in Ba County, or it will hold shares of Apple, Coca-Cola and American Express for a long time. Talking about artificial intelligence I don't know anything about artificial intelligence, but it doesn't mean that this technology is not important. The development of Al makes me a little nervous, which is similar to nuclear weapons. I think any labor-intensive industry may be threatened by AI. Talking about autonomous driving Regarding the impact of autonomous driving technology on insurance, he said that autonomous driving may reduce the occurrence of car accidents or reduce traffic costs, but it is still in a difficult initial stage. Talking about the American economy At present, it is not the absolute size of US Treasury bonds that threatens the US financial system, but inflation and the future value of the US dollar that threaten the whole system. So I'm not worried about the absolute amount of US Treasury bonds, but about the prospect of fiscal deficit. Talking about the investment direction The main investment battlefield in the future is still in the United States. I am very satisfied with the return on investing in Japan. I handed over my investment in India to the next management, and now I am investigating investing in Canada. Talking about the case of losing money The whole Paramount Universal shares have been sold and a lot of money has been lost. This is entirely my decision and has nothing to do with the two investment managers. Talking about successors Buffett confirmed that 61-year-old Greg Abel will take over the investment decision completely. Talking about Munger Munger once disagreed with me twice, suggesting investing in BYD and Costco. Both times Munger struck the table and urged to buy it. Looking back now, Munger was right in both decisions. Talking about the investment concept Luck plays a very important role in compound interest. My best skill now is to avoid risks and bad luck. When you are lucky, you must make full use of your luck.

2024-04-30

Yesterday, the exchange rate of the Japanese yen against the Hong Kong dollar hit a record low, falling below a six-year low, and it was tested at 4.944. Under the linked exchange rate, the appreciation or depreciation of the Hong Kong dollar against other currencies is completely controlled by the exchange rate of the US dollar against that currency. Therefore, even if the local economy has been experiencing frequent negative news recently, Hong Kong people can still take advantage of the "low water" of the yen to buy yen for tourism investment. What is the linked exchange rate? On October 17, 1983, the Hong Kong Government introduced the linked exchange rate system, and the Hong Kong dollar was pegged to the US dollar at the level of 7.8 Hong Kong dollars to 1 US dollar. The HKMA provided an exchange guarantee, promising to sell Hong Kong dollars at the strong exchange guarantee level of HK$ 7.75 to US$ 1 and buy Hong Kong dollars at the weak exchange guarantee level of HK$ 7.85 to US$ 1. Ensure the smooth operation of the currency and foreign exchange markets. What are the advantages of the linked exchange rate? The US dollar is almost universal, and the trade and financial transactions of various countries are mainly in US dollars. To provide a stable monetary pillar for Hong Kong and reduce the foreign exchange risks faced by importers, exporters and international investors. The closeness of the economic cycle can reduce the volatility brought by the economic cycle. The crisis of currency devaluation can be avoided What are the restrictions on the linked exchange rate? Local interest rates generally follow the trend of American interest rates, so we cannot use monetary policy to stimulate economic growth or curb inflation, which weakens Hong Kong's ability to rectify and adjust the economic cycle. The appreciation or depreciation of the Hong Kong dollar against other currencies is completely controlled by the exchange rate of the US dollar against this currency. If Hong Kong is confronted with the impact of overseas or local events such as the devaluation of competitors' currencies or the economic recession in export markets, it cannot adapt to the changes in the environment through exchange rate depreciation, thus affecting foreign trade and the balance of payments.

2024-04-23

Since the CPI in the United States was uncovered in March, the expectation of interest rate cuts in June has continued to cool down. In addition, Federal Reserve Chairman Powell said on the 16th of this month that the latest data shows that inflation shows no obvious signs of slowing down for the time being. If necessary, the current monetary policy can be maintained for a longer period, suggesting that interest rate cuts will be delayed. Reasons for delaying interest rate reduction: Inflation: Not returned to the target level. Market: US stocks and the property market continue to rise, reflecting that the financial pressure in the United States is not tense. Employment: According to the current employment vacancy rate is still higher than that during the epidemic period, it is difficult to touch the interest rate reduction that reflects the good employment situation. Residents' burden: Although the United States has repeatedly raised interest rates, the burden of interest on mortgage repayment is mainly on newly-built mortgages. On the other hand, there is little pressure on existing lenders to bear the rising interest expenses. Asset price: The US property market has rebounded, and the US stock market is still at a high level. The return on wealth of American residents is attractive, and the confidence against interest rates is strong. Impact of maintaining high interest rates: The Asian financial turmoil may return. Recently, Japan, South Korea, Vietnam, Indonesia, Malaysia, India, Thailand, etc. have all seen the triple whammy of foreign exchange, stock and debt, indicating that they should intervene in the foreign exchange market when necessary. However, once the foreign exchange reserves are exhausted, the national economy will be on the verge of collapse. The high interest rate in the United States has increased the interest burden of the federal government and individuals. The bank bankruptcy crisis at the beginning of last year may once again trigger the recent S&P downgrade of five US regional bank stocks to a negative outlook. In addition, under the high interest rate, the price of US debt will inevitably fall, and the newly issued national debt will be more difficult to sell. The government must pay a higher coupon rate in advance before it can borrow money to continue its life.

2024-04-17

CPI and PCE around the fed to cut interest rates! ? The Fed uses inflation data indicators to judge the current market situation and decide the monetary policy that should be adopted. Among many inflation indicators, CPI and PCE are the most influential: What is CPI? The consumer price index (CPI) of the United States is published once a month by the Bureau of Labor Statistics (BLS). Through the household questionnaire survey, the consumer's household purchase status is known, which covers the cost of purchased goods or services. What is PCE? The price index of personal consumption expenditure (PCE) is published once a month by the Bureau of Economic Analysis (BEA) of the United States. The survey includes household and business expenditures, covering out-of-pocket expenses of purchased goods or services+other expenses not paid out of pocket (such as claims paid by insurance companies). Core CPI & Core PCE Core inflation index is an inflation index made by deducting the goods (e.g. energy, food) that are particularly sensitive to prices from the original range of goods and services, and excluding the goods whose prices change greatly temporarily due to environmental, political and other factors. Therefore, it can better represent the actual inflation degree, and the inflation index that has not been deducted will be more stable. What is the difference between PCE and CPI? PCE covers a wider area than CPI. PCE survey method is business survey and CPI is family questionnaire survey. PCE's item classification weight will be dynamically adjusted every month to avoid the sudden surge of a single commodity affecting the overall index CPI, and it will be updated every two years. For the average consumer, CPI is closer to reality, and it is also used as a reference to measure the inflation of many financial commodities. The Fed is most concerned about PCE, especially the core PCE.

2024-04-09

Gold, US stocks, US dollar, breaking the law? ! The general law of the market is that stocks, the dollar and gold cannot rise or fall at the same time Us stocks strengthened and the dollar weakened The dollar strengthened ️ gold prices fell The dollar fell as gold prices strengthened But stocks, gold and the dollar are all strong at the same time The Dow is nearing 40,000, up three times from 13,000 12 years ago Gold hit a record high of 2,300, up more than 40% from around $1,700 12 years ago The dollar index is near 105 versus around 83 in 12 years, up about 25 percent over that period It is true that the chances of all three rising together are small, but it is also possible that the important point is that the market is not only the U.S. stock, gold and the dollar options Reasons for the strength of US stocks That compares with the outlook for stock markets in other countries Add to that a positive outlook for US corporate earnings; Revolutionary technologies are born, such as AI, and the Federal Reserve will begin the pace of interest rate cuts Reasons for the strong dollar Projected by weakness in other major currencies Both the dollar and gold are seen as safe havens by the market, and money flows into the dollar and gold, respectively, when the economy is worried and the stock market is falling Reasons for gold strength Even if the strong dollar is not good for gold prices, the rising gold price will suppress the dollar, but the actual situation is that the rotation of rising ️ makes both of them maintain strength The law that gold stock exchange cannot rise at the same time is just a blind spot in the market, and the key is that funds can flow into these three assets at the same time.

2024-04-02

The correlation between oil and gold, the dollar, and the stock market Gold hit a new high, oil prices are also rising, crude oil and the US dollar, gold, the stock market, which seems to have little correlation, but its internal but inextricably linked. The stock market is positively correlated with oil prices When a falling stock market is a sign of a bad economy, a bad economy means less demand for ️ oil. When there are fewer people to buy crude oil and supply exceeds demand, the price of oil will naturally fall, and vice versa. The dollar has an inverse correlation with crude oil In addition to the oil price denominated in US dollars, the United States itself is the world's largest demand for crude oil ️ inflationary pressure brought by rising crude oil prices will bring depreciation pressure on the US dollar, and the direct result of the depreciation of the US dollar is that the price of crude oil denominated in US dollars will also rise. On the contrary, lower oil prices are a good sign for the economy. Confidence in the American economy will push up the value of the dollar, causing oil prices to fall further. Gold is positively correlated with crude oil ️ The rising oil price means that inflation will follow and the uncertainty of economic development will increase. However, gold is a hedge against inflation. At this time, the role of gold as a hedge against inflation will be favored by people. So when oil goes up, gold goes up. When oil goes down, gold goes down.

2024-03-26

What is the impact of Japan's interest rate hike on asset markets? Japan as one of the world's largest economies, the yen is also one of the world's major currencies, the Bank of Japan to end the negative interest rate policy and quantitative easing adjustment, the abolition of 10-year Japanese government bond yield curve control, stop buying Japanese ETF and Japanese real estate (J-REIT) measures, what impact may be on the asset market? Since 2020, the interest rate of Japan is much lower than that of other countries. Investors will make spread trade through the spread trade, that is, investors will lend funds in countries with low interest rate 🪄 and invest in countries with high interest rate to earn the spread. A large part of the world's funds have been invested in this trading market and have obtained rich returns due to the increase of interest rate in Japan and the impact of exchange rate changes. Hot money from around the world would flood back into Japan and in the short term could have a ripple effect in global money markets, leading to a global capital shakeout. Developing country Developing countries that rely on Japanese capital will be negatively affected, especially until the tightening cycle in the United States is over, and capital outflows from emerging markets could lead to financial crises in some countries. Bond market Japan is the largest holder of U.S. debt and when investors withdraw from global bond markets such as U.S. Treasuries, it affects the global bond market. Yield rise Removing the YCC policy, under which the BOJ kept yields low by buying long-term government bonds, would mean interest rates would be more dependent on supply and demand, potentially pressuring longer-term government bond prices ️ yields rising. Japanese stock market The removal of ETF and REITs purchases means that the Bank of Japan has reduced its support for the stock market, which could have a negative impact on Japanese stocks It is important to note that Japan is only ending the era of negative interest rates rather than ending the era of low interest rates, so the impact on Japanese and global asset markets will be limited for the time being.

2024-03-19

Can Bitcoin's record high replace gold? Bitcoin (BTC) has risen above $72,000, a new high in more than 2 years once again set off a bitcoin boom. Since Federal Reserve Chairman Powell said that "Bitcoin could become an alternative to gold," the spot Bitcoin ETF was approved by the US Securities and Exchange Commission (SEC) and the increasing correlation between Bitcoin and gold, the market has also begun to compare bitcoin's substitution for gold in terms of safe-haven asset attributes. How Bitcoin is linked to gold It will increase significantly from 2021:28% before 2022 ️ 34% after 2022 ️ up to 47% in 2023. As the correlation between bitcoin and gold increases, it is further closer to the property of gold to some extent. However, there are still many differences which can be explored by the following points: volatility The measure of volatility is the Average True Range of Volatility (ATR), which describes how much the market has moved on average over a given period of time. In most cases, Bitcoin's volatility is much greater. Stored procedure As a physical asset, gold is kept in small amounts in vault bank safes and personal safes. On the other hand, Bitcoins cannot be stored in the traditional sense, but are stored in a secret number called a "private key" if you don't use a hardware or software wallet to protect your private key, buying bitcoins can be very dangerous. Source of demand In contrast to the 7,000-year history of gold as a tangible asset, the drivers of demand for Bitcoin are easy to identify, the current societal demand for Bitcoin is less well-defined and tends to revolve around price speculation buy-and-hold strategies and the underlying blockchain technology itself. So far, the status of gold has remained unassailable, but some people have accepted Bitcoin, while others and central banks still embrace gold, which means the beginning of the coexistence era.

2024-03-12

Gold topped the record high and its influencing factors. Gold broke through the top and hit a new high. The price broke through 2195 per ounce, only one step away from the 2200 mark. Will gold continue to rise? Refer to several important key periods and historical highs of gold in the past, and the factors affecting the price of gold: The dollar broke away from the gold standard (1971) When the American economy was in a downturn, President Nixon suddenly announced that he would stop the exchange of gold and the dollar, that is, the Nixon shock ended the gold standard. Floating exchange rate system (1973) Major developed countries in the world switched to floating exchange rate system, when the dollar depreciated and the price of gold soared to $100 an ounce. QE quantitative easing policy first appeared (2008) In 2008, the financial crisis broke out in the United States. In order to save the American economy, the Federal Reserve announced that it would reduce the interest rate to zero, and even pushed QE policy for the first time. The price of gold rose to $1,000 per ounce. Federal Reserve Policy and European Debt Problem (2011) In addition to continuous QE, the debt problem in Europe also affected the rise of safe-haven gold to $1,925 per ounce at that time. COVID-19 Epidemic and Sino-US Trade War (2020) At the end of 19th century, the global COVID-19 outbreak pushed the price of gold to rise continuously, and with the further deterioration of Sino-US relations in the past 20 years, the price of gold rose to $2,075 per ounce. Ukrainian-Russian War (2022) In the tense military relations between Russia and western countries, the demand for hedging in the market has increased greatly, and the price of gold has once again exceeded the $2,000 mark per ounce. What are the main factors affecting the price of gold? Economic crisis/war Gold has traditionally been regarded as a safe haven tool. When there is a war or economic crisis, common investment tools such as stocks will be impacted and funds will flow to gold. inflation When inflation is too high, the real income of stocks, bonds or real estate is greatly weakened, and investors tend to transfer some funds into gold to maintain the value of the overall assets. interest rate Gold itself is a non-breeding commodity. As long as the interest rate rises, the price of gold will fall. On the contrary, if the interest rate falls, the price of gold as a commodity will rise.

2024-03-05

What exactly is homeopathic trading and contrarian trading? Which is more profitable? Which is more risky? How to judge which one you are suitable for? What is homeopathic trading? Also known as right-hand trading, the trading strategy is the same as the market direction. The weak are always weak, the strong are always strong, buy high and sell higher! Advantages of homeopathic trading: It takes less time to enter the market gradually when there is a breakthrough signal, which can clearly grasp the general trend and reduce the transaction risk. When the trend disappears, it begins to exit, and it is easier to avoid the big crash. The capital turnover rate is relatively high. Disadvantages of homeopathic trading: Enter the market only because of a clear breakthrough, and enter the market only because of a clear breakthrough. You can only eat the middle in disguise. If the fluctuation in the middle is not big enough and the profit margin is less, some accumulated losses are quite large. What is contrarian trading? Also known as left-hand trading, investors presuppose that the current trend is about to reverse and try to profit from it, and establish a transaction that is opposite to the current market trend to buy low and sell high! Advantages of contrarian trading: Easy to buy at a relatively low point, the transaction cost is relatively low, and the profit margin is large. If you can bear the risk of fluctuation, the winning rate is generally higher. Disadvantages of contrarian trading: Personal subjective prediction is high. If the market falls, the bottom is an abyss and the time cost is high. This trading strategy is contrary to human nature. The more you fall, the more you invest, so you need to have considerable funds and strong psychological quality. There is no standard answer to that question, but whether it suits you or not. People with higher risk tolerance can go in and out against the trend, while those with lower risk tolerance can choose to trade with the trend.

2024-02-27

The relationship between quantity and price determines whether it is worth investing. Many investors will judge whether a product/stock is worth investing from the price volume, that is, the relationship between quantity and price. It can be roughly divided into the following three categories: Relationship between quantity and price of trend type: 1. Increase in volume and price: It means that the market is active and attracts many new buyers. 2. Volume contraction and price decline: it means that both the price and the volume of transactions continue to decrease, and the market is deserted, with a trend of continuous weakening. Deviation of quantity and price: 1. Volume decreases and price increases: it is a trend at the beginning of the trend, but if it appears in a trend that has already increased for a long period, it means that the transaction decreases and the future trend may weaken and reverse downward. 2. Volume increase and price decrease: the contradiction between the two parties may form a strong selling pressure if it is at the beginning of the downward trend, but if it is after a period of sharp decline, it may be a reversal of the upward signal. Consolidation or unclear volume-price relationship: 1. Quantity parity rises: kinetic energy may not last for a long time, and it is easy to enter the consolidation period. 2. Volume parity decline: it means that the trend is downward but there is a certain degree of continuous trading, and the trend is in a less clear consolidation. 3. Price increase and price leveling: It means that there may be rising opportunities for buyers and sellers to pull hard. But if the breakthrough goes up or down, it may form a new trend. 4. Quantity parity: buyers and sellers are in a wait-and-see atmosphere with high uncertainty. 5. Volume reduction and price leveling: the price changes little, the transaction volume decreases, and the future uncertainty is high. Pay attention to whether the product/stock price is worth investing, and consider other factors besides the relationship between quantity and price in order to evaluate it effectively.

2024-02-20

Copper-to-gold ratio as an index to judge business cycle. Copper-Gold Ratio is the ratio of copper price to gold price in English, which means how many ounces of gold are needed to buy one ounce of copper. It is often used as an indicator to judge the global business cycle. Copper-gold ratio calculation formula: Copper price per ounce/gold price per ounce = copper-gold ratio "copper" It is an important industrial metal, which is mostly used in industry, and more than 65% of it is used in construction and electronic products. Therefore, when the global economy grows rapidly, the performance of copper price is strong, so copper price is regarded as a leading indicator of global prosperity. "gold" It is a typical hedge and anti-inflation asset, which has little to do with industry, and its price is mainly affected by interest rates and inflation expectations. The rise in the price of gold usually represents an increase in worries about the economic recession. Therefore, when the economic recession or geopolitical factors break out, the price of gold often performs well, and when the economy is prosperous, the price of gold tends to be flat or fall. Relationship between copper-gold ratio and business cycle; When the economy recovers or enters the growth stage, The demand for copper has increased, and the price growth rate has surpassed that of gold, so that the ratio of copper to gold has increased. When the economy eases or enters the recession stage, the demand for copper decreases, and the demand for safe haven of gold increases. The price performance of copper is weaker than that of gold, which makes the ratio of copper to gold decrease. The ratio of copper to gold does not have a long-term absolute high or low point, but as a relatively short-term change, it is still of reference value.

2024-01-30

Is it accurate to predict that the Fed will raise interest rates, cut interest rates and raise interest rates? This week will usher in the first FOMC interest rate meeting in 2024, and the expected interest rate of the market will remain unchanged at 5.5%. Investors can make predictions through FedWatch before the results of interest rate negotiation are announced. What is FedWatch? FedWatch is a tool website of Chicago Mercantile Exchange (CME Group), which is mainly used to analyze the possibility of adjusting interest rates at FOMC's future meetings. How does FedWatch calculate? CME uses the Federal Funds Future, that is, it uses the expectation of interest rate in the trading market to calculate the probability of interest rate increase or decrease. Subtract the futures price from 100 to get the implied interest rate of the current month. Subtract it from the current benchmark interest rate and you can get the spread. Finally, divide the spread by 1 yard (0.25%) You will get the probability of increasing and decreasing interest rates in that month. Is FedWatch accurate in forecasting? According to historical data, it is predicted that the probability of raising interest rates from 2016 to 2019 is as high as 80%, and the interest rate trend has indeed been upward. After the second quarter of 2019, it is expected that the probability of reducing interest rates will be as high as 100%, and the actual interest rate trend is also highly accurate as a whole. The official website of CME also contains the Fed bitmap, so that users can clearly understand the expectations of all FOMC members on the Fed target interest rate and can easily find out the probability of raising interest rates and lowering interest rates in the next few FOMC meetings, which is a leading indicator worthy of reference.

2024-01-23

Are there advantages and disadvantages of negative interest rate policy to stimulate the economy? The Bank of Japan started to discuss interest rates today. The market expects that there will be no major policy changes at the meeting and the "negative interest rate policy" will be maintained. What is the negative interest rate attack strategy? The Bank of Japan implemented it in early 2016, and the central bank reduced the policy interest rate to "negative", so the reserves deposited by banks in the central bank could not receive interest but had to pay "penalty interest". How to affect depositors? Depositors deposit money in the bank without interest, and the bank also charges interest on depositors. Suppose the interest rate is negative 1%, and deposit $100, and after one year, it will only be net $99. How to stimulate the economy? 1. Bank deposits to the central bank must pay interest. 2. Forcing banks to increase lending to enterprises and individuals 3. Promote investment and consumer demand 4. Achieve the goal of stimulating the economy What are the disadvantages of negative interest rates? Bank profits are under pressure Interest income decreased, lending margin narrowed, and interest margin narrowed, which hit the banking industry. Asset bubble The capital flows to different assets to make assets bubble, and when the interest rate returns to normal, the bubble may burst. currency devaluation Negative interest rates devalue the country's currency, which is good for exports, but the situation continues, and countries are afraid of falling into a vicious circle of competition. Deposit reduction Negative interest rates drive away depositors, and the funds that banks can borrow also shrink. The emergence of the "negative interest rate policy" is to stimulate the Japanese economy. When the Japanese economy continues to cool down, the Bank of Japan needs to examine whether to cancel the "negative interest rate policy", which will stimulate the yen to strengthen.

2024-01-16

Sam's law predicts economic recession To know whether the economy will fall into recession, since 1970, there has been a 100% accurate measurement index called Sam's Law, which has not been missed so far. The Sam's Law was discovered by Claudia Rae Sahm, the current chief economist of the Federal Reserve: What is Sam's Law? She found that when the three-month moving average of the unemployment rate in the United States, minus the low unemployment rate of the previous year, exceeds 0.5%, it means that the economy is going through a recession stage, which is consistent with this situation in every recession stage in the United States since 1970. Therefore, the indicator was named Sam's Rule recession indicator (Sam's Law). Shortcomings of Sam's rule decline index; Overprediction: Sam's rule recession index is 100% accurate, but since the 1960s, it has predicted 13 economic recessions, but actually there are only 9 recessions. Delay: Four of the recent recessions were predictions; Two times occurred almost simultaneously with the economic recession; Once it was even behind the economic recession. Is the great recession coming? According to Sam's Law, as of December 2023, this figure has increased by 0.23 percentage points, indicating that the United States is extremely unlikely to have fallen into recession.

2024-01-09

Buffett Indicator was put forward by the famous investor Buffett in 2001, claiming to be the best single indicator to measure the stock market valuation at any time. It is a percentage obtained from the total market value, gross national product (GNP) or gross domestic product (GDP), which can judge whether the stock market is overvalued or undervalued, and is applicable to stock markets everywhere. GDP and GNP Take the United States as an example, the difference between GDP and GNP is that GDP means that as long as all the output is counted in the United States; As for GNP, Americans will be counted if they produce abroad. However, because the actual difference between GDP and GNP is within 1%, the mainstream market usually uses GDP to calculate later. Five grades of ratio: Buffett indicator 100% represents a reasonable valuation of US stocks. Buying stocks at 70% or 80% may have a good return. 114% to 134% is slightly overestimated. More than 134% is a serious overestimation. Buying stocks at 200% is like playing with fire. What is the latest Buffett indicator? The Buffett Index broke through 200% in August 2021 and rose to a high level at the end of the year. It began to decline in 2022, with a low of about 150% during the year, and rose again in 2023. Recently, it rose to more than 170% to 180%, which was more than 50% higher than the historical trend level, and it was about 171% as of January 2024, reflecting that the US stock market was seriously overheated. Buffett indicator is questioned. In addition to the delay in GDP data, non-stock assets, such as bonds, real estate and gold, have not been assessed. More people question that it is out of date. When Buffett's index was first published, many constituent companies were in manufacturing, retail and energy industries. Today, the largest companies in the United States are in science and technology industries. At present, the price of the stock market fully reflects internationalization, but GDP only evaluates the production in the United States, causing the numerator (total market value) to rise, while the denominator (GDP) is not affected. How should investors use it? Buffett indicator can be used as a supplementary valuation tool, and it is also one of many emotional indicators in the market today. Others, such as VIX volatility, fear and greed index, are more used not as a tool to find trading opportunities, but to tell you the market situation and future expectations, and use it to predict whether the market is overvalued.