Refelction on 2022

It’s Christmas Eve and wishing everyone a peaceful Christmas and a progressive 2023 New Year. Let’s review key developments in 2022 and prepare for what may be a very volatile 2023.

 1. Covid-:19: Whilst the jury is still out on the long term side effects of the experimental mRNA vaccines, mankind is saved by the mutation of Covid-19 viruses into the mild but very infectious Omicron strain. To that extent, China has revised her Zero Covid policy to open up her accessibility in January 2003. We hope the global economy may show signs of revival thereafter. Still global weekly new infections and deaths are respectively 3.7 million and 12,000. (Fig. 1)

In both US and UK approximately 7.5% of those infected developed long Covid which invariably impaired their quality of life. We have to be individually vigilant on safe and hygienic practices.

2. US-NATO/Russia Proxy War in Ukraine: With Angela Merkel’s confession that the Minsk Agreement was just for NATO to buy time to prepare for an assault on Russia, there cannot be any meaningful negotiation for long term peace for Russia. (Fig. 2).

Whatever hope and trust there may have been, they disappeared. The conflict now becomes an existential struggle for both NATO and Russia. Skipping all the Western propaganda, the reality is US and her NATO allies have exhausted her armory to supply Ukraine and cannot restock in real time. Russia on the other hand have aligned her military industrial production to replenish wartime consumption in real time and hence will have a decisive win based on logistics and conventional warfare. Putin has also tilted her energy sales towards the East and economic sanctions produced little results. With Qatar angered by Europe’s corruption accusation (Fig. 3)

Qartar's rebuttal became an energy issue. Europe may finally have to climb down on her pretense of having moral high grounds on most of her dealings. When the fig leave is blown away, hungry and shivering citizens on the streets may finally wake up to send puppet politicians in UK, Germany and France packing back to their masters just like Sweden and Italy. I am hopeful that this day may come in Spring, 2023.

 3. Global Financial Reset: Last week Japan shocked the global financial market by taking a first step in easing the JGB yield control. This signaled the decades long Yen Carry Trade is not a sure win formula. The basis of a “Strong Dollar Policy” first developed by Robert Rubin in 1996 using Yen Carry Trade and Gold Carry Trade to prop up the USD will likely see curtain falls in 2023. We have described in last week’s blog “Zombiefied”, the horrific finances of the US Government and the Federal Reserve. The Pound, the Euro and the Yen is not far off. Although no other currencies are gunning for the role of “Sole Reserve Currency”, for self preservation, Central Banks are all realigning for a Reset. The shock and volatility is almost guaranteed to happen in the first half of 2023. I do not have the capacity to give sound advice on individual asset allocations because readership of this blog, small as it is, spread across many countries. My own preparations is on the same level as if I am housebound in a snow storm in North America or Europe. i.e. independent and self sufficient.

 The following are some data on the performance of financial markets in 2022:

A. Stock Market: Ignoring FX effects, performance of key stock market indexes for Year to Dec 24, 2022 are shown in Fig. 4. By descending order, they are: Nikki +3.59%, FTSE +0.92%, France CAC -8.96%, Dow -9%, Singapore -14.3%, Hang Seng -15.13%, S&P -19.78%, Shanghai -21.83%, Korea -22.7%, Taiwan -24.46%, Nasdaq -33.39% and Russia -43.22%.

Adjusted for FX effect and using USD as a base, Index performance will change to: Dow -9%, FTSE -10.16%, Nikki -10.23%, Singapore -14.57%, France -15.11%, Hong Kong -15.23%, S&P -19.78%, South Korea -28.24%, Shanghai -28.94%, Taiwan -31.99%, Nasdaq -33.39%, Russia -38.26%. When interest rates and currencies are wrongly priced, everything became bubbles.We are not out of dangers yet as the Reserve Currency still struggles to be in a position when it no longer has the legitimacy nor moral imperative to retain ;

B. Debt Market: For the Year 2022, the so called Risk Free Asset (USGGYR10) lost -16.77%, 20 Year Bond -26.95% and 30 Year Bond -33.94%. The Federal Reserve holds 48% of all outstanding US 30 Year Bonds but like all things in US, it applies a different standard to itself. The Federal Reserve does not recognize they made a loss and treat such losses as a deferred asset only to be amortized by reducing remittance to the US Treasury. The entire UST Yield Curve is in severe inversion choking funding in business financing and investments, the financial markets expects a recession in 2023. As previously reported, the Fed is only using interest rates as a tool as it continued a covert QE operation via the Overnight Reverse Repo Operation to handle a dumping of Treasuries by both domestic and international bond holders. Even with Republicans in control of Congress, they are still talking about another $Trillion stimulus and no cut back in spending. The Fed’s half baked attempt to fight inflation will fail and hyper-inflation by currency debauchery is the likely outcome.   

 C. FX Market: The best performing currency in 2022 is the Russian Rubble which gained 8.74% against the USD. All crony currency of the Anglo American Empire were disadvantaged by the Russian Sanction Policy
(Fig. 5)

D. Precious Metals & Crypto: Precious Metals were steady against USD but Bitcoin lost -64%. (Fig. 6)

Luke 12:22  Then He said to His disciples, "Therefore I say to you, do not worry about your life, what you will eat; nor about the body, what you will put on. 23  Life is more than food, and the body is more than clothing. 24  Consider the ravens, for they neither sow nor reap, which have neither storehouse nor barn; and God feeds them. Of how much more value are you than the birds? 25  And which of you by worrying can add one cubit to his stature?