9.10 - what is the most attractive asset in Europe?
We are still searching for safe haven in trading assets.
About once every week we are turning to the question of safe havens in trading. The situation is getting worse every week and that is why every time this topic is more and more important. We have talked about gold last week. And oil was save for only two weeks of almost undisturbed growth, which was hit yesterday. Asian markets haven’t been save for a long time now for obvious reasons. And dollar, while is still the most popular can hardly be looked at like something reliable.
So, we are turning to the currency in Europe. And of course, with Italian question not settled we are not talking about euro at the moment. We want to look at Swiss franc. The currency is strong and stable and that is why we aren’t really talking about it. It doesn’t give us any reason to talk about itself. And that is exactly what attracted our attention.
Swiss franc, although not backed up by oil or gold is only the second most dynamic currency in Europe, giving the first place only to Norwegian currency, which is backed up by oil. Moreover, in less than two months, the currency gained 5 percent opposite yen – Japanese currency was always sort of a rival for franc when it comes to safe havens in turbulent trading times.
Franc is extremely resilient and strong. It only gets stronger during crisis time as all of the traders tend to pour their assets and faith into it. Its separation from the troubles, surrounding Eurozone and neutral status of Switzerland make it extremely attractive to traders who are tired of all the trading drama.
But all of this doesn’t mean that franc doesn’t have its flaws. For example, its strength is what is making it so expensive for traders outside Switzerland. Those in countries with weak national currency that is tied to dollar will not be able to afford franc during the time of crisis as it is going to become stronger and thus even more expensive.
But all of it might be worth the risk and the expenses as there is a pretty strong force supporting franc – its gold refining industry that grew by 7.9 percent in the last 18 months. There is also no problem with joblessness in the country – there are only 22.5 people with no jobs in all of Switzerland. GDP of the country is growing way faster than the GDP of the whole EU.
Nothing influences Swiss economy – financial crises, trade war between China and United States, Italian government monetary policy – all of that goes by Swiss franc. Swiss economy looks good even compared to the growing American economy. And we see no reason why the pace taken by the country and its currency is going to slow down. not bad, right?
So, we thing that Swiss franc has surely earned its place and right to be looked at as a safe haven for traders in time of turbulence even despite its high price.
What is happening to tech stocks lately? It seems that all of the companies decided to mess up as much as possible and see what that can make to traders and the markets. First there was Facebook with all of the data privacy scandal. Then there was Tesla with all of the late night tweet-sessions by Elon Musk which were always followed by declines in shares’ prices. Amazon also made the headlines with reports of bad working conditions and extremely low payment to its workers. It seems that now it is a turn for Google to mess up which the company just did.
It was announced that a huge glitch took place as long ago as March. And we are only learning that the data of as much as 500,000 people might have been made public. Given that we give Google a lot of personal information it is unacceptable to see glitches and mistakes like that. Google gather info about our locations, home address, all the emails and passwords. Imagine if all of that goes public. From the point of view of users, it is a worst case scenario.
And traders were more than happy to show Google just how much they are disappointed by the actions of the company. Yesterday prices for Google shares sank to the lowest point since the middle of July and although some of the positions were recovered, today the fall continues.
But we are sure that you, just like us have also noticed the tendency, going on with the tech stocks at the moment. Just what we talked in the very begging – because of all the trust we as traders and investors pour in big companies like that they stop being careful with the information and power that we give to them. All of the money invested in the big conglomerates blind them and we end up in the current situation.
Do we have a choice? Well, we certainly should not forget that we hold all of the cards to the problem. Selloffs are seen all across the sector right now. Shares for Apple, that released another failed iPhone model, Tesla, that is still influenced by Musk and Facebook that can’t recover after the departure of Instagram CEOs have been falling in the end of last week and are still falling today.
Seems that for the tome0being those, not striving for risk trading are to stay away from American tech shares. After all there is no shortage for Asian and European companies that would love to see our assets and trust put into them in order to stand against their American over-buffed counterparts.
For the past few months ever since the trade war broke off China was trying to make peace with the United States. They tried to go into the negotiations with the biggest economy in the world, they tried to persuade Trump to let go of his decisions and bring the situation back to normal, but everything was in vain.
When international scene proved to be too hard for the Chinese to handle, they, logically, decided to fix their own economy by trying to attract new investors and launching new big projects. Which also proved to be a failure as every time China was trying to do something new, United States would just hit it with the new tariffs.
And now it looks like the Chinese are giving up. With the shares hitting 17-months-low and yuan going even lower, everything is pointing to the fact that the Chinse have let go of their currency and are going to let yuan into the free float in the markets. A move that can prove to be useful when it comes to monetary policy as too much control could bring China to a financial default.
It is possible that yuan is only going to get weaker from this point. Thera are no international stimulus to is and we see that the pressure from the United States is only getting stronger from here. We wouldn’t be surprised to see Chinese giving up the idea to make amends with United States for now. Trump administration is going to go through some rough patch with midterm election coming closer and we could see some changes in the political scenery of the United States.
Although it is clear to us that Chinese economy is no place for us at the moment it is completely possible to hold onto your yuan at the moment. Sooner or later the current American administration is going away. And after that huge changes in the political and economic climate in the world re going to begin. And that is when and where our yuan can come in handy. Of course, we know that that is a long wait we are talking about right now, but we are sure that it is worth it.
- by Anna K.