Like Darren Winters, those who have been in the game long enough know to follow the money and ignore the mainstream narrative. Perhaps the best indicator of where assets prices are heading comes from watching capital flows into different assets classes. More often than not, the mainstream talking heads, whose job it is to spin a narrative, manufacture critical mass consent spin the news that is often contrarian to capital flows.
The handful of fat fingers that make all the right moves at all the right moments are not acting on the news produced for mass consumption. Put simply for those of us not in the Big Club, the best heads-up of where asset prices are heading is to follow the money, the dynamics of capital flows into assets.
Through the optics of capital flows, we get closer to reality of where assets pricing are heading
So the mainstream narrative is that Europe is on the brink of war but follows the money, and the truth is different.
For example, the fear of war in Europe of war where real you would see the ultimate haven assets rally to multi-year highs. The little-known currency safe-haven Swiss Franc/USD, also known as the Swissy, would be smashing through the ceiling resistance price level and reaching multi-year highs as capital flows into the safe-haven currencies. Precious metals gold, the ultimate anti-debt safe-haven asset, would also be hitting multi-year highs as investors scramble into gold.
But to date, that is not playing out. The Swiss Franc/ USD remains well below its 52 weeks high at 1.08, and gold is barely up on the month and sitting on price support range of 1,8012 USD per troy ounce, at the time of writing this piece.
As Darren Winters points out, the price of safe-haven assets remains stable which indicates no increase in capital flows into fear assets despite the mainstream war drums beating.
Think about it. Why would resource-poor Europe want to stoke up a war with resource-rich Russia? The truth bomb is that European Union is more interested in forming a closer strategic relationship with Russia. Russia’s abundance of natural resources from natural gas to wheat and the EU manufacturing in the north and tourism economy in the south make the EU and Russia natural allies. Moreover, the new silk road, the pivot to the booming economies East is also alluring to an EU trading bloc economy valued at $15 trillion which depends on exports. German, the motor of the EU economy, exports $1.81 trillion annually and is the third-largest exporter economy in the world. So large manufacturing exporters and tourism economies will not be touting for war.
But since WWII, the US occupation of Europe remains.
Europe is home to 60,000 US troops with 40 military installations in Germany
In other words, the EU does not have an independent foreign policy because the bloc’s security is tied at the hip with the US.
While a shooting war may not be on the cards, a new cold war is what could come next.
US hegemony is based on keeping the USD as the world’s reserve currency. The military, monetary industrial complex works together. NATO keeps the USD on the throne.
Russiaphobia gives relevance to NATO, it provides western defense contractors with billions of dollars in defense deals. The military-industrial complex MIC always needs a boogeyman, it makes the cash tills ring, and it provides MIC an opportunity to sell merchandise that is due to expire.
Follow the money what has happened so far in Ukrain is western defense contractors doing deals
It is no surprise that the top-performing sector is Aerospace & Defense ETF. Lockheed Martin Corporation LMT up 8.11% on the whiff of a new cold war.
So when the mainstream was playing the sky was falling based on geopolitical tension and four rate hikes which triggered a risk sell-off the dip was quickly snapped up.
If you follow the money, capital flows indicate a buy the dip was still alive and well
By following the money you’ll notice that since late January, when the tech-wreck selloff lost momentum, the asset class which received the most capital inflows was equities.
Equities 980, cash 2184, bonds 3277
As they say, there is no such thing as money heaven, so when there is a sell-off in one asset class, the trick is to figure out where the capital will flow next.
Notice from the chart that capital flows in bonds remain stable.
Bond “outflows” are not very common. Nevertheless, there is just too much money sitting in bonds for RIA/PWM allocations if yields continue to move higher.
$1.5 Trillion of negative-yielding bonds went “non-negative” on Thursday, the largest 1 day on record. Negative yielding bonds are now below $5 Trillion, the lowest level in over five years (and down from a record $18 Trillion).
Follow the money, Oversold technology growth stocks could be where the money goes next
Bearing in mind that the Fed doesn’t have much room to tighten. The US public deficit hit a milestone of 30 trillion USD and the US trade deficit sits at a record 2 trillion dollars.
Meanwhile, there is a Dragon in the East China flying neck and neck in a technology race with the US bald eagle. China has displaced the US as the world’s top technology manufacturer and is equal in Artificial intelligence, 5G, quantum information science, semiconductors, biotechnology, and green energy. If this trend continues, China will lead in the next decade, with the US lagging.
The Chip Act, where Congress advances $52 billion in chip funding to domestic manufacturers, follow the money. The technology race could be down to whoever can manufacture and control the supply of the next generation of nanochips. Chips could be the focus of this technology cold war, and not having a domestic supplier could mean being held hostage by a foreign rival.