đ Weekly Market Newsletter | Edition No. 01
News Update + A Full Analysis of Major Indices Including Stocks, Crypto, Commodities, Bonds & Forex
Hi Readers,
This post was originally written for our BFMC Investors on June 8th 2022, I wanted to share this letter as our first substack post to launch our newsletter, enjoy. - Bramwell, CEO
BFMC Community,
Iâm happy to have a great opportunity today to share a much anticipated market update covering Q2/2022 with you all today and Iâll be focusing on giving a high level, zoomed out perspective of where we stand in the current financial market cycle via what Iâve dubbed for todayâs newsletter âStorytimeâ (aka. a bramwell-like long form journal-style entry post below) that will precede a more to-the-point âzoomed-inâ bullet points covering important aspects relating to our digital assets with opinions on the short term health of the financial markets and a few predictions on where we may be headed into Q3/Q4 2022, letâs dive in.Â
Part 1. Storytime | âMoney Printing, Pandemics & Meme-Stocks O Myâ
Capital Markets operate much like a traditional Mom & Pop Shop operation;Â
There becomes a need (demand) from the consumers for products.
The shop sources the products at a wholesale price and fills inventory (supply)
The shop owners add a mark-up to the shelf price of the products
The business model progresses to the marketing stage to bring in consumers (fulfilling demand) and shop owners make profit at a % margin.
 The global investment products for purchase are no different and the financial markets follow this business cycle.Â
Letâs travel back to March 2020 for a brief moment. The biggest crash of the capital markets occurred (letâs replace the word crash with flash sale or âwholesale-liquidation-eventâ) where investors across the world both institutional (smart money) and middle class (the masses) had to make the choice of selling out of their equity positions in fear that prices would plummet and never return and so convert their investments into cash for a stable and *predictable* safe haven. Meanwhile other investors rode out the free-fall and lived with the drawdown and unrealized losses on paper or dollar cost averaged their strong portfolio positions at pennies on the dollar.Â
We can compare these investment products; stock market equities and debt products, commodities, money markets and crypto markets to the âShop Inventoryâ from my earlier anecdote. We can understand that the global inventory amongst this panic fell to institutional grade entry prices and the smart money managers filled their shelves for what was to come next - any guesses?
From 2020 onwards those same institutions began the marketing phase of their investment products to now retail traders and investors who had an abundance of âfree moneyâ from the government and a lot of time on their hands to be programmed by the media. Retail investors used those funds to gobble up low quality meme stocks, overpriced tech stocks and low grade crypto by the dozens in a dopamine induced FOMO (fear of missing out) rage hoping to get rich in 10 days, âTo the Moonâ they shouted.Â
Simultaneously, the global economy was still inflating from the mass quantitative easing (money printing) by the federal reserve who owns the patented rights to the U.S Dollar (the global reserve currency) and money managers, economists and traders worldwide began forecasting the inevitable âPOPâ that would soon take place - and pop it did.
In April 2021 the federal reserve announced a series of projected interest rate hikes and a reduction of their balance sheet to combat âinflationâ and the world gasped as the free-falling USD (in technical analysis we chart the symbol DXY = US Dollar) begin to form a bottom and gain strength as investors began stockpiling cash in anticipation of a crash.Â
Cryptocurrencies in April 2021 were the talk of the capitalist world. Celebrities, business moguls, influencers were all promoting projects and everyone was making money, it was pure euphoria. We experienced an all-time high for many crypto projects with Bitcoin topping out at $69,000 per coin - little did anyone anticipate this would be the beginning of a bear market for capitalists globally and a painful year ahead for investment portfolios on paper.Â
As I fast forward to the present day, we can all agree itâs been an emotional roller coaster as a human being on earth over the last year, and especially for investors over the past 12-14 months.Â
Rising interest rates scared money managers away from risk-on assets such as U.S equities.
Short term bond yields soared making them a pseudo safe haven for parked cash (even in the face of 9% inflation YoY)
The invasion of Ukraine by Russia sent oil prices to ~$120/barrelÂ
The bottom line of corporate and consumer balance sheets shrunk.
COVID took China for a round 2 fight.
Monkeypox had its 15 minutes of fame.
Geopolitics and culture wars have created a mental health pandemic for the democratic world.Â
Allow me to re-welcome you all to 2022, the worst financial year ever recorded.Â
So here we are in June 2022- everything is down, everything.Â
Stocks are down, inflation is high, commodities & food prices are at all time highs, supply chains are lagging, gas is a fortune, companies are going bankrupt, consumer debt is skyrocketing, crypto is amidst regulation - itâs truly an incredible time to be alive. We are only awaiting a housing crisis and alien invasion with a few solar flares to reach a climax of capitulation so iâm told.Â
In all seriousness, all is not as doom-and-gloom as my witty tone may depict as remember financial markets are a cyclical organism in itself. When prices are low, investment products are purchased wholesale and accumulated for inventory supply until shelves are filled. Mark-ups will be added for margin and the rodeo economy will return to optimism when the big players have eaten the wealth of the masses - this is the game at play and it always has been.Â
So what is my role in all of this? Iâm supposed to be the intelligence and crypto-guru youâve all trusted to guide you through this madness of a business cycle aren't I?Â
Absolutely I am and I take that responsibility on my shoulders 24 hours a day, 7 days a week - but I do not control the markets and I cannot make prices go up or down, nor was that my commitment to all of you.Â
My commitment to all of you was to help introduce you to blockchain and a financial revolution that is upon us as we speak. My commitment was to educate each of you from understanding the opportunity of blockchain to its utilization as an internet technology. My vision for all of us is to position ourselves now accumulating digital assets that have real world value, solving important problems facing our world today. My vision is to help each of you research, build a portfolio of incredible Web3 projects and become invested as early market participants. It brings me incredible joy to build the course material for our workshop sessions from teaching each of you technical analysis, NFTâs, DeFi and Macroeconomics as it is the transfer of education, knowledge and perspectives that lay a foundation for wealth as an investor - and I truly hope despite the market volatility that each of you have remained grounded emotionally in understanding the long term ROI that the blockchain industry will yield for those who understood the inevitable integration into society.Â
For our community our team has been dialed into the markets every single day relying on our network of the best analysts, traders, investors and researchers to which we work together to aggregate information, chart the trends, forecast economic indicators and synthesize the next moves of the market.
As we proceed into Part 2 of todayâs newsletter I hope to articulate in short form what I believe to be the most important takeaways from these perspectives and opinions of those I trust the most alongside my own wisdom on the cycle of finance in the global markets.Â
Part 2. Market Analysis & Important Notes | âWen Moon?â
A. DXY Analysis vs Total Crypto Market Cap
The U.S Dollar strength is traditionally inversely related to equity or risk-on asset strength such as Bitcoin or the S&P 500 Stock Market. We see below that the bull market for crypto began in the Summer 2020 following the COVID crash as the USD lost strength and investors fled to risk-on assets to outpace inflation anticipating quantitative easing. Once the dollar bottomed in 04/2021, we see in the orange graph (Total Crypto Market Cap) that the top was in and crypto began falling. Today we see the DXY reaching a 25 year resistance / supply region and what happens next will dictate the fate of the US economy and global markets. If the DXY breaks upwards, we can anticipate a recession, depression and further sell-offs. If we reject as I've plotted possible, we could see a bull market resume until Spring 2023 where our next demand region will be faced.
B. The Federal Reserve (Central Bank Monetary Policy)
The role of the Federal Reserve is to use monetary policy to buffer the ebbs and flows of the consumer economy and business cycles by using quantitative easing (culturally known as money printing) and interest rate hikes/cuts to affect consumer spending via cheap money or economic contraction by making money more expensive to borrow.Â
In early 2022 the Fed declared that inflation was soaring and interest rate hikes were needed to slow down the rising costs in the economy. Remember that inflation occurs when money supply increases thus decreasing the per unit value of each dollar.
I like to articulate that items are not getting more expensive, rather the purchasing power of the instrument or currency is simply diminishing, requiring more.Â
Each month the Fed meets and discusses interest rate policy and releases anticipated hikes or cuts in addition to commentary of their meeting minutes, this is a major factor in the trending direction of markets as we speak.
*Additional factors such as Consumer Price Index (CPI) numbers are released in a similar fashion which affects the discussions of policy makers on which tool(s) to use and to analyze the degree and intensity of monetary policy required to soften the landing of the economic cycle.Â
As of today, the outlook for 2022 is projected to be negative with multiple basis points projected as hikes throughout the remainder of the year.Â
As investors, we are hoping for a âdovishâ vs âhawkishâ outcome in future meetings and the hail mary is a reversal of these interest rate hike projections. Until then, we await important economic statistics such as inflation and CPI to help us understand, analyze, predict and position our capital favorably.Â
C. Bond Yields and Commodity Prices
Capital Rotation and arbitrage on a billion & trillion dollar level is achieved with highly advanced algorithms and computer models deployed by the world's largest hedge funds. These computers can identify trends and patterns for investment funds to park funds or anticipate a rate of change incoming to alert money managers where the next best opportunity may align.Â
Below I have charted 2-YR US Bond Yields vs. S&P 500 Stock Index to show the relationship between equities (risk-on) and bonds vehicles (risk-off) and you can see that when the 2YR bond yields began rising this began a sell-off of equities as investors parked funds short term seeking a guaranteed return vs. holding in depreciating assets. While there are many factors at play (not necessarily isolating soaring bond yields as causation) we can understand how each segment of the global market rotates capital from one pond to the next, or pre-positioning to gain an edge on the next move up or down.Â
*Not depicted here are the graphs of Oil, Wheat Futures, Corn, Nickel and Fertilizer which all experienced soaring prices. These commodities become excellent staples to hedge against a falling global economy as they are the building blocks of necessity to keep the baseline economy running (think iPhone low power mode).
D. Crypto RegulationÂ
We need regulation for integration.Â
Long gone are the days where the masses believed crypto was for scams, terrorists and drug dealers.Â
While the false reputation and stigma may have proceeded crypto pending itâs maturity as a trillion dollar industry, we all understand now that integration and adoption requires government policy, regulation and taxation - and Senator Lummis has written the first draft of a promising bill that outlines how digital assets can be safely and fully incorporated into the infrastructure of the U.S and therefore global economy in time to come.Â
The passing of this bill may be a catalyst for increased utility and therefore a reversal of market sentiment.Â
E. Ripple vs. SEC
One of the strongest assets in the digital asset ecosystem is the XRP Ledger. Ripple is the company creating a global use case for the XRP Ledger by offering end products to Central Banks to eliminate the friction of cross border payment costs and stagnant liquidity. The SEC sued Ripple in 2020 creating a supply shortage due to market participant fear that the XRP token may be declared a security of Ripple - the value of the ecosystem plummeted.Â
Itâs been a 2-year battle with the SEC for both Ripple and XRP users, however the end of the tunnel is nearing. As of June 2022 the lawsuit has finalized its discovery stage and is moving towards important decisions from the Court which would favor Ripple and the dismissal, settlement or sentiment towards a positive outcome for the XRP ledger.Â
Once the lawsuit has concluded, Ripple expects to go public with an IPO and has maintained full confidence the XRP will be an integral part of the decentralized financial system.Â
Follow Youtuber / Attorney Jeremy Hogan and TheBearableBull for the latest XRP news.Â
Part 3. Conclusion | Final Thoughts
When there is fear in the markets, opportunities are the highest to create wealth due to the accumulation / distribution cycles iâve discussed today.Â
Where on the following chart would be the best place to buy assets, at the price peak during the euphoria stage, or the depression stage? Itâs obvious, the depression stage.Â
However this isnât easy for investors as emotions cloud logical judgment in times of stress and when portfolios show drawdowns. Unfortunately these emotions get in the way of an effective strategy called âdollar-cost-averagingâ or lowering the entry price of your asset positions by accumulating more units at lower prices.Â
This is the stage we find ourselves currently, between market depression and disbelief of any upward rallyâs.
As this stage is accompanied by global chaos, it can become instinct to protect cash and capital reserved for our basic needs such as food, rent and shelter - this is important and naturally should be prioritized. As investors, we must compartmentalize a separation of these two concepts and make decisions for our future should we have financial goals to achieve. Â
As a mentor to my community, these are my final thoughts.Â
Be patient. Investing is not day trading - investing has a multi-year horizon, not day to day.
Donât ignore the media, as youâll be uninformed, however do not consume the charts minute by minute and news hour by hour as youâll become mis-informed.
Have confidence in your portfolios, theyâre well researched, fundamentally strong and have future utility embedded in their roadmap. While we cannot predict the future, we can still have confidence that our speculation is rooted in logic and reason, research and knowledge.Â
Do not overexpose your financial health to risk-on assets to the point that bills are late, needs cannot be met and forcing you to capitulate on your investments while they are in a drawdown. Losses only occur when you sell the position.Â
Dollar cost average when extra capital is present.Â
Use this time to create alternative income streams. Recessions and depressions can last 2,5,10,20 years - ensuring youâre insulated from economic contractions is imperative.Â
Use this time to learn and further your investment education by reading, scheduling sessions with me to overview the charts and ask questions. Practice paper trading or performing your Technical Analysis or Fundamental Research.Â
The global economic landscape is fragile and my macroeconomic view of the world is that we are on the precipice of a changing world order and the collapse of western capitalism, crumbling democracies and socio-political paradigm shift over the next 20 years.Â
My long term prediction of how life will be in 5,10, 20 years is built atop layers of futuristic technology and a social environment unimaginable from life today - and that world requires a layer of connection that can be reverse engineered to where blockchain technology is today in its infancy stages.Â
Our World is becoming increasingly digital by the second. Similar in history to how the invention of the Internet transformed how humans communicate globally & store information, blockchain technology is about to transform the systems of global trade and finance while redefining how humans transact and store value in a meta-verse driven societal duality. I wrote this last year and have it displayed on my website. This is my authentic belief based on thousands of hours of financial education both post-secondary and self-absorbed knowledge.Â
My firm stance is that digital assets are at the center of several trends reshaping the global investment landscape and are poised to be a multi-trillion dollar market in the years to come. Itâs critical as an early adopter of these disruptive technologies to build a foundation of knowledge and experience prior to investing in cryptocurrencies and digital commodities, therefore I remain strongly bullish in the long term, bearish in the medium term 1-2 years due to unpredictable politics and economics and bullish in the immediate short term 6-12 months as I believe the markets will have one last hurrah before the next U.S elections.Â
This concludes todayâs market update.Â
My hopes are that it was an insightful & valuable read for all of you and I welcome answering any questions or clarifying any of the points I discussed above today in a private session or phone call.   Â
- Bramwell Fox | CEO BramwellFox MetaCapitalÂ