The Old Man’s Views It’s That Time of Year

It’s the season to be jolly, but much of that will depend on whether your country is still in the World Cup.

I’ve enjoyed this World Cup more than I expected. However, holding the event this time of year not only interrupts the many domestic leagues, it also acts as a distraction for many traders. Which this year might be a good thing.

Equities have put in a very decent rally, trying to end the year on a good note. However, with so many problems ahead of us, I can only consider this rally as a great opportunity to instigate short positions at reasonable levels.

It may be the season to be jolly, but it’s not a time to get carried away by false optimism.

Peak inflation may have arrived (with an emphasis on the “may”), but a return to the levels targeted by our governments and central banks is a long way away.

Governments have got away with murder for too many years. All these fiscal targets, which on paper might make sense, have taken away a lot of the flexibility needed to manage an economy well. and this has led to the mess we are in today.

The public has been getting government “goodies” and allowed political leaders to do whatever they want with our finances as long as the narrative has suited young voters.

The harsh reality is that governments have given away too much public money for years, and the vultures have come home to roost.

That means years of going without and years of declining public services, which will cause a lot of frustration for a public accustomed to being wrapped in cotton wool.

As we saw in the 1970s, when the economic picture was similar, civil unrest and Trade Union activity are already starting to appear. We should not be surprised if this will increase throughout 2023, which will only worsen living standards.

Whichever way I look at it and try to be positive, commodity inflation and a lack of consumer purchasing power do not make me optimistic about the medium-term economic outlook. Therefore, I cannot be friendly towards the equity markets.

That said, many listed companies are heavily involved in commodities, so it might not be all doom and gloom.

Recent events in cryptocurrencies have not been positive for the sector, and therefore we will have to be very cautious about what coins and tokens people have in their portfolios.

This year has frightened away many new investors, and this is not a good thing for a business reliant on trust.

I expect the business to contract further, and I wonder whether we will see any serious interest return to this sector for some time, so values might remain relatively low.

Block Chain technology will continue to develop, and De-Fi will continue to grow, albeit at a much slower pace than many had forecast.

As a Libertarian, I am less concerned about greedy people being mugged by the likes of SBF than the government taking control of how the business develops.

Those using the criminal activity of SBF as an excuse to work with governments may live to regret it. Let us remember SBF was one of those working with government entities before he got caught.

I am sticking to BTC and a few fun coins that I already have, but I think I will only expand my holdings once the situation settles down and we know what direction the crypto industry will take.

I like commodities; Everyone should when inflation is on the rise.

My favourite play this time of year has always been buying out-of-the-money options on grains and beans. It doesn’t always pan out, but it probably will this year.

We have seen significant declines in the price of these commodities over recent months, and if we see a slight drop in volatility, it is worth picking up a few options and seeing where we are nearer to March.

I will also keep monitoring the energy market as there is a lot of talk about lowering energy prices, but much of what I hear in the media makes little sense to me. We will need to get used to higher energy costs, whether fossil fuel or renewable.

What we will have to watch next year is how long it will take before people start to question the necessity of all these carbon taxes, when we sink further into recession and have more fuel poverty.

Governments will only change tack on this issue once people start to rebel. The days of 16-year old’s deciding what energy policy is good for economic growth and society, in general, must come to an end, hopefully soon.

Until next time…