Robert Karas, CFA

'Alternative for Germany wins its first regional election' The political class's lack of courage is evident in the potential nomination of Cazenove as France's "new" Prime Minister. Schultz's party faces a similar fate, receiving one-figure percentage votes in both Landers, mirroring the catastrophic outcome seen with Macron's party in past elections. Instead of addressing the majority's concerns, the losers propose "new" solutions, such as excessive electrification to decarbonize economies, instead of promoting solutions to help decarbonize what existes. By neglecting the needs of the majority, these parties risk alienating voters and driving them towards extreme ideologies. It's crucial to uphold democratic principles by balancing policies that benefit minorities and the majority to prevent a repetition of history.

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Warren Buffett: "Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything." Apart from this, the narrative of central banks switching from US Treasuries to gold has been fuelling the recent gold price rally. However, gold’s record-breaking rally seems to have run out of steam, at least for now. Impacting both central banks and investors alike, what does the end of the gold rally mean? Our research team takes a closer look.

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Should you worry about the Sensex at 85,000 plus? The BSE Sensitive Index's value was taken as 100 on 1 April 1979, and its base year was 1978–79. Thus, to date, the compound returns delivered by Sensex are 16%. Against which the compound returns during the last ten years stand at 12%, while compound returns during the previous five years stand at 16%; these returns are inclusive of last year’s 28% gains. Clearly, in terms of comparison with long-term returns, there is no indication of any bubble or extra-high gains in Sensex. Also, the economy continues to remain on a high growth path. Even the recent budget proposals auger well for the long-term growth. The only flip side is geo-political tensions. Nevertheless, if you are considering an investment for at least 4-5 years, then irrespective of the Index levels, what matters more is the companies where you are investing. That is the strategy we always vouch for, and it has always delivered handsome returns; there is no guarantee, though. My sincere suggestion is to remain invested always without predicting the market. Invest in at least 15 companies focusing on diversification, attractive valuations, and reasonably clear visibility. Happy investing! Dr. Anil Kumar Asnani SEBI Reg. Research Analyst WhatsApp: https://wa.me/919755920780 Mobile: 9131361959 Website: https://www.smartverc.com

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Bunds: free-wheeling « debt brake » 🧐 A sell-off in Germany’s 10-year debt in recent weeks has seen its yield trade above the rate for euro interest rate swaps of the same duration for the first time The move ahead of federal elections in February signals investors’ belief of a « debt brake reform » and more issuance to come. So-called “swap spreads” have long been positive in Germany — unlike in other major bond markets where they have often traded below zero — meaning investors have been willing to accept a lower return to hold Berlin’s debt relative to expectations of long-term interest rates. This unusual feature of Germany’s bond market has been a function of the relative scarcity of Bunds. It was written into the German constitution in 2009 and took effect in 2016, though it was suspended during the Covid-19 pandemic and again after Russia’s full-scale invasion of Ukraine, before being reinstated this year. It has become a bone of contention between the left and right in German politics (FT) « The song is over » 2nd episode. To be continued…

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German central bank estimates the economy will shrink by 0.2% in 2024. This comes after a 0.1% decline in 2023. This also marks the longest stretch of contraction in 25 years. For 2025, the Bundesbank expects only 0.2% GDP growth, down from 1.1% which can easily turn into a 3RD year of recession. It seems to me that the Bundesbank is overly optimistic in its forecasts. We need to see how things unfold when Trump starts twisting arms in a tariff war against Europe or forces the EU to impose tariff duties against China.

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SX5E (left) vs SPX (right) - looks like SX5E vols, skew and termstructure were outside the Bollinger Bands, and are coming back inside. The SX5E Index did not make it outside the Bollingers. SPX vols and termstructure just touched them. Is that already good enough of a turning point?

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Foreword to Volume 16 of ,,Five Past Five” Dear Readers, The 2024 U.S. election results came with an unexpected Republican sweep, driving asset prices up. On the other hand, in Europe, Germany faces political upheaval as Chancellor Scholz's coalition collapses, threatening economic stability at a crucial moment. Meanwhile, Australia’s proposed ban on social media for children under 16 signals a new era in digital regulation. This move may set a precedent for global tech policy. Amid these events, AI continues to push boundaries. Major partnerships, like Anthropic’s with Palantir and AWS, and innovations such as OpenBMB’s MiniCPM-V 2.6, show how this technology is shaping sectors far beyond tech itself. Enjoy the read, and as always, your feedback is welcome. Adam

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As one would expect, SPX Skew (1m 25d) should be elevated with the upcoming US elections. Below we are looking at HS<go> and the SPX vs the SX5E Skew (1m 25d). The upper chart shows that overall Skew was coming off for both after Covid. (blue box) But it also shows, that Skew has been rising since end of 23 for the SPX, and end of Feb 24 for the SX5E. The chart in the middle shows that SPX Skew used to be over the SX5E up to the end of 21, and only since about July this year turned more expensive relative to the SX5E again. Correlation between the two is at its highest since end of 21 too. You can create your own Skew indices using CIX<go>

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CHF/JPY finally broke down. See the chart below. This cross could hit 150 before year end. Japan's cabinet secretary Hayashi hints at higher rates. Some tidbits from the statement: OKYO, July 23 (Reuters) - Broadening pay hikes among smaller firms is crucial, said Japan's top government spokesperson, Yoshimasa Hayashi, underscoring the administration's drive to achieve sustained wage gains. Such gains have been a policy priority for Prime Minister Fumio Kishida's government, in its effort to prevent rising living costs from hurting consumption and derailing a fragile economic recovery. Hayashi's remark came in a Reuters NEXT Newsmaker interview ahead of the Bank of Japan's policy meeting on July 30 and 31, when the board is likely to discuss whether conditions allow it to lift interest rates from current levels near zero. It was crucial for Japan to achieve a "positive" cycle in which firms can pass on higher costs through price hikes, so that they can earn enough to keep raising pay, Hayashi added. "We expect the Bank of Japan to decide specific monetary policy with an eye on what's happening in the economy, and through close dialogue with markets," Hayashi, who is the chief cabinet secretary, said on Friday. "What's important is for a positive cycle to spread a bit more among smaller firms," he said, when asked about the expectations of some market players that the central bank could raise interest rates this month. In a shift away from a decade-long programme of radical stimulus, the Bank of Japan (BOJ) exited negative interest rates and bond yield control in March. Markets are warming to the idea of a rate hike at this month's policy meeting. BOJ Governor Kazuo Ueda has signalled the bank's readiness to hike rates if there is sufficient evidence that wage hikes will broaden, and keep inflation durably around its 2% target. While big firms have offered bumper pay hikes in annual wage negotiations this year, it is unclear whether their smaller counterparts can keep up. Asked about recent yen declines and their impact on the economy, Hayashi said it was desirable for currency rates to move in a way that reflected fundamentals, but declined to comment on whether recent levels were out of line with them. The yen has fallen more than 10% against the dollar this year to languish around 38-year lows, weighed down by the wide difference in interest rates between the U.S. and Japan. Tokyo is suspected to have stepped into the market this month to prop up the yen, which has hovered around 157.50 to the dollar JPY=EBS, after touching a six-week high of 155.375 last week in the wake of suspected intervention. Critics have said its focus on the need to beat deflation has become outdated at a time when Japan has faced inflation exceeding the BOJ's 2% price target for more than two years. #fx #Bank of Japan #higher rates #Japan #CHFJPY #currenices

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"Why WW3 would not be ‘bullish for gas’. If there are reasons to be ‘bullish’ on European gas prices, a global stock market meltdown on the eve of a Middle East regional conflict is not one of them. " There has been bullish support for TTF in Europe recently, in part due to the escalating conflict in the Middle East. Seb Kennedy discusses these developments and shares his insights about the Gas, TTF, and LNG markets. 👇 Read More : https://lnkd.in/e33v3-Yq #Gas #TTF #LNG #Europe #Energy #MiddleEast Seb Kennedy EklipX Research

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Thr political chaos in Germany is a symptom of the same failed policies that have led to economic hardship. This is not a market failure; it is entirely the result of a sequen0ce of governments attempting to impose flawed industrial policies. Signs exist that the CDU returns to its christiandemocrat roots, lost during the Merkel terms. Is there hope that after the next election positive changes will happen with a government led by a reformed CDU? https://lnkd.in/dzemGFyp #germany #business #economy #mittelstand #volkswagen #friedrichmerz #cdu

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🇩🇪 Germany’s Political Chaos: A Turning Point for Europe? Germany, long a symbol of stability, is facing political upheaval. Snap elections are expected in early 2025 after the collapse of the SPD-Green-FDP coalition amid economic turmoil. The IMF predicts a 0.2% contraction in 2024, while debates over energy and climate policies have deepened divides. The CDU/CSU leads in polls, aiming to redefine Germany’s energy future, including revisiting nuclear and gas policies. But forging a stable coalition won’t be easy, with the far-right AfD gaining ground and tensions between conservatives and Merkel-era moderates. What does this political chaos mean for Germany’s energy future and Europe’s leadership on the global stage? Read More: "The collapse of the German government throws Scholz and Merkel energy and climate legacy in the trash bin" https://lnkd.in/e5xDfxr9 Written by Francesco Sassi and published on EklipX Research What’s your take? 🔗 Share your thoughts!

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..and here is the device friendly version The attached note looks at the differences between now and when Trump first took over in 2017 and the constraints he faces. The key points are as follows: The economic and financial environment today is more challenging than when Trump first took over in 2017: inflation is a bit higher; the budget deficit is worse; bond yields are higher; and shares are more expensive. He also faces constraints from: rising bond yields; not wanting a sharp fall in shares; a razor thin House majority; and a political mandate to get the “cost of living” down and not up (with tariffs). This could mean his more populist policies may ultimately be contained resulting in a better outlook for shares than many fear, albeit it will likely still be rough at times along the way and more constrained than we have seen over the last few years.

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Short paper: "The cross-currency basis spread [which] measures deviations from covered interest parity... is determined by 1) credit spreads differential, 2) output differential, and 3) expected inflation differential." https://lnkd.in/e25AAnuY

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