Federal Reserve is destabilizing global financial markets and harming other economies
Happy Tuesday! I am back from my week-long week trip to the UK, where I spent a few nights in the hospital for surgery. I could not trade at all over the last 8 days, but I was honored to witness the Windsor part of Queen Elizabeth’s funeral. I also happened to be in London when the British pound was destroyed by the USD. On Friday, the GBP lost 4% of its value. That was definitely a “can you believe the currency of one of the world’s superpowers will drop like its TQQQ in a day” kind of moment!
Speaking of TQQQ, I made an amazing trade on TQQQ at the Open with Brian. We had a blast trading today. You can watch our recap here.
The world is falling apart, as everyone who follows the market knows. The Federal Reserve, the US central banking system, is collapsing the stock market and, more importantly, the bond markets. This will trigger a major economic recession, starting with the housing market and moving onward. Goldman Sachs and BlackRock are warning that the markets are not pricing in the risk of a global recession yet, and most likely SPY and QQQ will experience more significant drops in the short term. Ned Davis Research now sees a 98% chance of a looming global recession. A former Chinese central bank official warned that the Federal Reserve’s most aggressive interest rate hike cycle since the 1980s is destabilizing global financial markets and harming other economies.
The UK is having a bad time. The British pound has had one of its worst days on record and that has impacted their gilts. Bond markets have had a terrible year everywhere, but the fall in the UK’s debt this year, at 27%, has been one of the worst. Speculators are betting that there's more dreadful news to come, with option markets implying there is a 43% chance that the pound will hit parity with the dollar before the end of the year. British hedge fund manager Crispin Odey agrees that the pound is not out of danger, saying in an interview, "I think sterling is still quite vulnerable and we have to see how it goes."
Maybe it is time for Americans to go buy everything that they can in Europe (including in the UK). Given the cheap dollar, I myself am considering buying tons of property in Spain, Portugal, and possibly the UK.
What do you think? Reply to this email and let me know.
To your success,