- Gold and cryptocurrencies soaring –
At the well-attended “Invest” trade fair on 17/18 March in Stuttgart, where I also gave two presentations for Freedom Broker on the topic “G7 versus BRICS – where to invest?”, the banking crisis triggered by the bankruptcy of Silicon Valley Bank (SVB) and the collapse of Credit Suisse was the dominant topic. Now the question is whether the banking crisis could turn into a global real estate crisis. Not a few felt reminded of the real estate and banking crisis in 2008/9 when the 5th largest US investment bank Lehman Brothers went bust. Due to the well-known domino effects, a banking crisis can even grow into a global systemic crisis, which was only prevented back then in 2009 by the state and the central banks. The big question now is how far the central banks can raise interest rates to fight inflation without causing a real estate crisis or recession.
The most important asset in the capital market is trust, which is now dwindling more and more. And yet there are some solid banks, also in Eastern Europe. Special opportunities are now opening up in Kazakhstan as an alternative for Russia. Freedom Broker now also offers direct trading in shares from Kazakhstan. But before that, investors have to open an account, which can be done quickly under this link: https://freedom24.com/invite_from/2952896.
Andreas Männicke also gives his assessments of the new opportunities in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 208 at www.YouTube.com.
New opportunity in Kazakhstan via Freedom Broker
At the Invest trade fair on 17/18 March in Stuttgart, the bankruptcy of Silicon Valley Bank (SVB) in the USA and Credit Suisse in Switzerland as well as the effects on the stock markets were the dominant topic on all sides. My presentation at the “Invest” trade fair deals with the topic “G7 versus BRICS – where to invest?”, whereby the topic of emerging countries or emerging markets was hardly discussed at the “Invest” trade fair. For this very reason, one should now take a closer look at the BRICS & Co countries, i.e. Brazil, India, China and South Africa, which definitely have good future prospects due to their low valuation. Of course, Russian shares are still not tradable on the Moscow Stock Exchange due to the sanctions and the ADR programmes have all been terminated. Nevertheless, investors should open an account with Freedom Broker now, as it may be possible to exchange ADRs for original Russian shares again in the next few months. As a precaution, you should therefore open an account with Freedom Broker now, which is very easy via the link https://freedom24.com/invite_from/2952896.
A good alternative for Russian shares are shares from Kazakhstan, which are now very cheap. In general, there are some banking stocks in Eastern Europe that should get more attention right now, such as Bank of Georgia, Kaspi.kz. and Halyk Savings Bank (HSB). Kazakhstan stocks are also directly tradable in Kazakhstan through Freedom Broker, which is new. You also get 3 per cent interest on a US trading account and as much as 2.5 on free liquidity for a euro account. In addition to the banks Kaspi.kz and HSB, interesting shares from Kazakhstan include the oil producer Kazmuniagas and the uranium producer Kazatomprom.
Bankruptcies of Silicon Valley Bank and Credit Suisse have wide repercussions
The collapse of all bank shares worldwide in the double-digit percentage range was triggered by the bankruptcy of Silikon Valley Bank (SVB) from the USA, which in turn financed many start-ups and venture capital companies in the USA. US regional banks in particular, which also financed start-ups and venture capital companies, saw their share prices plummet and had to be propped up by the FED. SVB was, after all, the 17th largest bank in the US that invested too much money in bonds and was negatively affected by the bond crash in March 2022. There was already a similar case in the UK last year, when the British central bank had to bail out pension funds with a £75 billion cash injection, which prevented a global conflagration. This shows again and again how vulnerable banks can be in crisis situations, although most banks are better off now than in 2008/9.
Central banks find themselves forced into unusual bailouts
Investors and borrowers of the SVB withdrew their money en masse, which then led to the bankruptcy. In the event of a bank run, the entire financial system can collapse very quickly. The US Federal Reserve knows this, too, and last week it provided the US banks with almost USD 300 billion in liquidity to avoid domino effects and a loss of confidence. In addition, the Federal Reserve guaranteed all deposits at US banks. This has never happened before in the history of US banking. However, this also shows how vulnerable the US banking system still is. The great financial crisis in 2008/9 also originated in the USA with the bankruptcy of the US investment bank Lehman Brothers.
The new “Quantitative Easing” (QE) expanded the FED’s balance sheet by USD 300 billion again, after it had previously been reduced from USD 8.8 to 8.3 billion by not buying up maturing bonds again. Previously, the money supply in the US decreased for 2 months, which was unprecedented. The SVB has now been bought up by HSBC.
Credit Suisse remains a tragedy
Credit Suisse (CS) has long been a problem child in Switzerland. Now several important deals went wrong and there may also be a bank run at CS. Along with UBS, CS was one of the largest asset managers in the world. Now the share price fell from € 8 at the beginning of 2022 to € 0.87, and on 20 March alone it fell by over 50 percent in one day. Bond investors will come away empty-handed. Bonds of CS with a volume of 17.3 billion USD became worthless. German banks are allegedly not affected by the CS bankruptcy. BaFin gave the all-clear for German banks. Only one SVB subsidiary had to be closed.
Thus, the market capitalisation of CS dropped to only € 3.2 billion while UBS still has a market capitalisation of USD 58 billion. But also the share price of UBS fell from 21.25 to 18.2 USD. Similarly, Deutsche Bank AG’s share price collapsed in the last two weeks from over €12 to €8.4 at the low on Monday morning, but has now recovered intraday to €9.3. On 20 March, the DAX also recovered by 1.5 per cent to 14,987 index points, which had previously been in free fall.
CS also saw masses of customer money withdrawn beforehand, so that last week the Swiss central bank felt compelled to give liquidity aid in the volume of CHF 50 billion to save the systemically important bank. Now the USB wants to buy up CE for CHF 2 billion. There were similar considerations at Deutsche Bank and Commerzbank back in 2008/9 during the financial crisis, whereby Deutsche Bank is also still very vulnerable despite its good profit results.
Are the “golden times” coming?
Due to the banking crisis, investors were very unsettled last week and shares were sold. In contrast, gold and cryptocurrencies were in demand again as a “safe haven”. For the first time in a long time, gold temporarily rose to over USD 2,000 per ounce, an increase of 8 per cent in one month, while silver only gained slightly more than 4 per cent in one month. However, cryptocurrencies were even more in demand: Bitcoin rose by 13 percent in 1 month to over 28,000 BTC/USD and by as much as 67 percent in 6 months. Ethereum also rose by 5 percent in 1 month and by 45 percent in 3 months. As a result, almost all cryptocurrencies have now recovered strongly.
Weak oil prices point to recession
In contrast, the price of Brent oil plummeted by 8.8 per cent to 73.75 USD/barrel and WTI oil by as much as 12.4 per cent to 67.7 USD/barrel in the last 3 months, each representing a new low for the year. The oil price is now pricing in a recession, which may well come. Due to falling energy prices – the price of gas has also halved since the beginning of the year – inflation should fall in the future. However, the wage-price spiral that has now been set in motion will keep it high.
Central banks in a dilemma
The central banks must now perform the balancing act of fighting inflation with rising interest rates on the one hand and not adding fuel to the fire and causing a recession or corporate bankruptcies on the other. The ECB recently raised key interest rates again to 3.5 percent. Now, on Wednesday, all investors are looking eagerly at the Fed, which will probably pause for a rate hike in view of the turbulence on the stock markets.
We must also continue to pay attention to the geopolitical dangers in the event of an escalation in Ukraine. China and Russia now want to cooperate even more closely and thus also position themselves against the USA. Ex-US President Donald Trump encouraged his supporters to protest in the streets if he is impeached and arrested soon. Is there then the threat of another civil war in the USA? Despite the recovery on 20 March, the stock markets are likely to remain turbulent and volatile.
Good opportunities in Eastern Europe in the Balkan region and the Baltic States.
Nevertheless, besides gold, shares are also a good protection against inflation. In Eastern Europe, even bank shares are a good alternative to Western bank shares. The Bank of Georgia even reached a new all-time high recently, but has now corrected somewhat. New opportunities are now also opening up in Kazakhstan, with Freedom Broker providing direct access to the Kazakhstan stock exchange. The Balkan and Baltic regions are also very stable. The CROX index for shares from Croatia even rose by 12 percent and the CTX index for shares from the Czech Republic by 11 percent since the beginning of the year. Both Eastern European indices clearly outperformed the DAX. There will continue to be outperformance opportunities in Eastern Europe, so that it is still worthwhile for German investors to look beyond their own nose to the East.
Inform first, then invest
But there are also new opportunities in Eastern Europe in general, where there are always outperformance opportunities. Inform yourself now in detail about the background and the development of the Ukraine/Russia crisis but also about the future recovery potential of undervalued shares from Eastern Europe. There are also new opportunities in the Baltic States, Kazakhstan, Georgia and Ukraine.
Review: In 2018, 10 stock markets from Eastern Europe were among the best-performing stock markets in the world, all of which clearly outperformed the DAX and also the US stock market. The Moscow Stock Exchange was the clear outperformer among all world stock markets in 2019, with a gain of over 46 per cent in euro terms. However, the Bucharest Stock Exchange (Romania) also rose by over 32 per cent in 2019. The stock markets in South-Eastern Europe and also in the Baltic countries remained very stable on the plus side (Croatia +13 per cent). In 2020, 6 stock exchanges from Eastern Europe were among the 30 best performing stock markets in the world and last year even 11 stock exchanges from Eastern Europe. In 2021, shares in Kazakhstan rose by more than 80 per cent. Last year, 5 Eastern European stock exchanges, mainly from the Balkans, clearly outperformed the DAX, and this year there are already 8 Eastern European stock exchanges that have outperformed the DAX. The CTX index for shares from the Czech Republic has already risen by 11 percent this year. So even after the Ukraine war, it is still worthwhile to look beyond the horizon to Eastern Europe.
Order now a trial subscription (3 issues by e-mail for only 15 €) of the monthly stock letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend/bond special as well as with a lot of background information and new investment suggestions such as the “Stock of the Month” and lucrative certificates at www.eaststock.de, there under Stock Letter. The next EST will be published in March 2023.
TV/radio notes: The last radio interview was on 2 March 2023 and previously on 31 October on Börsen Radio Networks. The next radio interview is on 2 October 2023 Stock Exchange Radio Networks. Also watch the latest EastStockTV video on YouTube about the Ukraine war and the new outperformance opportunities of the Eastern European stock markets. Every 14 days Mr. Männicke is also on YouTube at, “Finanzstammtisch” by Capital-Manager.com, most recently now again on 7.3.23 with the topic “G7 versus BRICS, where to invest?” Capital-Manager.com’s next Financial Roundtable is on 21 March 2023 at 2.00 p.m. with the topic: “Bank collapse – this is what the gold price is doing now”. You can download the interviews and videos at www.eaststock.de, there under the heading “Interviews” as well as the videos from EastStockTV. By the way: have you already subscribed to the EastStockTV YouTube channel?