Financial Market Analysis & Forecasts

The above chart in Turkish Lira shows the capture of 122 trading units during the rally so far. Note that EM currencies are on the leading edge of the Bubbles collapse.

 Contents of this Q1 2021 Review

1. Introduction.
2. The main geopolitical calls.
3. The market predictions and performance.
4. Funds and their performance.

1.0 Global Forecaster Introduction

Global Forecaster was set up in the summer of 2019 to inform and advise professional asset managers through troubled waters. During this year, there were obvious indicators that global markets were soon to peak in February 2020 and collapse with the most grievous consequences. I have called this transition The Great Shift as it is driven by the hegemonic challenge of China to America and the West.

With six quarters of performance under our belt, the results of our geopolitical predictions, market predictions, and fund performances have been very pleasing. We believe the key to high returns and long term success is based on:

1. Prescient market views generated with a systematic multi-timeframe and price modelling system.
2. Good trade entry points with tight and structurally meaningful stops (entered with contrarian price modelling).
3. Appropriate position sizing.
4. Risk management in accordance with trends.
5. Successful trade exit points.

These five points describe Global Forecaster’s risk methodology.By reading the below quarterly performance appraisal you will have a better idea of how we apply my risk allocation methodology as well as how we combine geopolitical predictions using various models from Breaking The Code of History. All of these real-time predictions have been published on the Global Forecaster site. We then go a stage further and apply these trades to different fund mandates. Track records are given below.

2.0 The Main Q1 Geopolitical Calls

1. Sino-Western polarisation will accelerate swiftly as the effects of the pandemic worsen.  This prediction is on track and continues to be very significant in it geopolitical impact.
2. The delusional gap between economic reality and the stock market will close. The Phase 2 correction will end imminently and, following a sharp reversal sentiment, will swing to the other extreme during a six month decline of up to 80% from the February highs in European stock markets and only a slightly smaller fall in America. As the reality gap closes, the social mood of populations will become markedly darker and there will be increasing social unrest due to economic stress on the lower and middle classes. These classes will find a just cause to express their collective frustration and anger. Additionally, as the pressure builds there will be regime changes in countries with unstable economies (especially hydrocarbon economies).  This prediction is still to play out, with the bubbles collapse.
3. There will be very significant asset price deflation well before inflation becomes noticeable in shares, commodities and the property market. Gold and silver will be a major store of value and will appreciate 200%+. This prediction is still to play out and we have been short gold in the correction that should allow good buying levels.
4. The Pandemic will continue for 18-24 months until a vaccine is found or herd immunity is reached. Herd immunity is being bolstered through T cell immunity which is not as of yet tested. We estimate that with T cell immunity the herd immunity levels are at least double the published figures. We am not confident that we will see an effective vaccine role out until next year (2021). This prediction is on track.
   1. There will be secondary and tertiary waves.  This prediction is on track.
   2. Governments will have to become more effective at constraining the pandemic, locating new virulent strains and keeping the economy operating. This is happening in the East at present, but not in the West. This prediction is on track.
   3. Testing (including for new strains) and tracking must be greatly enhanced. This prediction proved correct. 
   4. A global response to the pandemic could and should be led by Britain. This prediction is on track.
   5. There needs to be more focus on the inevitable mutations of the virus into a multi-strained simultaneous pandemic. This prediction is on track.
   6. In Western societies, there could be long-term health benefits as populations are encouraged to take self-responsibility for their health. This prediction is on track.
5. The lockdown strategy of Western governments will in time be viewed as a misguided response that equated to economic suicide. This is because lockdown failed to balance the overall relatively low death rate of the majority versus the high magnitude of economic destruction. By focussing on the preservation of the older, less productive population, governments have sacrificed the future for the younger population. The failure by Western governments to respond holistically illuminates both the predominant left-brained thinking process and the influence of the madness of collective behaviour. Governments should have resisted this with clear strategic leadership. This prediction is still to play out
6. There will be a sovereign debt crisis starting in the US, Italy and/or Spain. The German Supreme Court will do all they can to resist the ECBs support of the Italian bond market. Bond yields will rise considerably by the years end. America will also be at risk of a sovereign bond crisis and ultimate restructuring. Bond yields will rise not due to economic recovery, but due to the risk of holding debt. This prediction is still to play out.
7. The EU will fracture from its current structure and devolve to national levels. This will be triggered in the later stages of Brexit. Moreover, Brexit will happen on terms that benefit the UK as the EU’s position weakens. This prediction proved correct. The vacuum created by the shrinkage of American global influence and the accelerated Chinese coercion of other nations could provide Britain with a massive opportunity to strengthen its global links with the Commonwealth and establish a new global trading network. Britain will hold the upper hand in the Brexit negotiations. This prediction is on track.Sterling will appreciate more than any other currency in the world during the next 6 months rising to Cable 1.60 plus and against the Euro to 0.65. Exporters, be warned and prepared. This prediction is on track, although we are in a corrective phase to 1.30 before the next advance.
8. There will be social unrest in Russia. Resultantly, there is a high probability that Putin will be displaced. Such an eventuality would provide the strategic opportunity to entice Russia back into the Western fold.  This prediction is still to play out.

3.0 The Q3 Market Predictions

3.1 GF Methodology-Designed for Risk Takers

I was a macro asset manager for over 35 years. I know there is a big difference between having an idea and translating it into profit. My Arkent and Market Analysis Services are designed to do just that.

Over the past 12 months, Global Forecaster has evolved its risk system into the one described below. The trade performance tables represent this standardised system.

To remind you of how it works, each idea has a risk unit, defined from the entry point to the stop level, and a trade idea in one market can have a maximum of 100% which equates to 10 risk units at any one time. Trade recommendations can be either 33.3%, 66.6% or 100%. The 100% limit in a market can be put on all at once or in combinations of 33% and 66% sub-trades. For example, T12a, T12b and T12c would be three 33% trades in one market and for one idea. High conviction trades require the time frames of short, medium, and long to all be aligned. Notably, in 2020 Q3 the conviction levels were very high due to the high and integrated signal strength associated with my Phase 3 roadmap.

My trading strategy is to trade in alignment with long-term directions and trends and then find short-term entry points that translate into long-term time frames that produce tight risk rewards on entry as well as high multiple risk returns. The tight risk rewards on entry may mean that an entry point needs to be attempted several times. A spreadsheet is available on request to explain all the trades which are displayed on the site and the summary tables below.

We then go a stage further, taking my trade recommendations and applying them to specific fund structures such as Top Macro, General Macro, Long Short, and Commodity funds operated on behalf of clients. The history and performance of those funds is given below. 

3.2 Top Performing Markets Over the Past 12 Months

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Key changes; Our top 13 table shows no movement at the top with the FTSE remaining in the No1 position. However Silver is up from 4^th to second after a solid quarter, with gold stationery despite some solid returns. The other main movers have been dollar pairs. The Dollar index up from 8 to 6 and Dollar Swiss up shooting into 8^th and Dollar Turkey shooting into 10^th. Meanwhile, Spain and the Sp500 have dropped out of the table.

How the table works As an example of how the Global Forecaster risk system works, we have included the above  table of our 13 top-performing markets. Take the FTSE as an example where 763.2 risk units were generated over 12 months. This equates to a 76x return on a 100% trade of 10 units. In reality,76x is a massive number. Even a 13x multiple represents a very significant return at the bottom of the table.

Another clear pattern that this table demonstrates is how our predictive systems work in all the asset classes we cover. This is conditional of course on directional movement which has a cyclicity of fallow periods and fertile periods. The key to this system is avoiding the fallow periods that eat up energy and capital with no return, focusing instead on the fertile periods in sectors. This is key to consistent overall portfolio generation.

3.3 General Appraisal of Q1 Performance

Q1 was a quarter of mixed parts, but overall produced excellent returns. Our view is that the Bubbles of Bubbles is bursting, saw confirming evidence in the leading edge of the bubble indices and stocks like the NASDAQ and Tesla all reversing. However, the trailing edge of the bubble benefited from a value switch and continued to make a mixture of marginal gains  and new highs. Within this environment, the excellent positioning of our trade entry points at peaks made some gains in the weakest markets like the NASDAQ and minimised capital loss in the stronger equity markets. Meanwhile, our Dollar calls and trades were all very successful, as were our Sterling cross trades. The linkage between the Dollar and Gold and Silver also meant that we had a good quarter in precious metals (43 pts in gold and 56 in silver). Our Emerging markets recommendations in the currencies had strong returns with Turkish Lira the top-performing market of the quarter (122 pts) as did the shorts in emerging equity indexes. In commodities, our short positions endured losses initially and came good as the markets finally peaked and reversed, oil being our best performer.

3.3.1 Equity Markets

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The Above Chart Shows the NASDAQ trading during the quarter and some excellent entry points that produced positive returns in this leading edge of the bubble index

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Except for the NASDAQ and FTSE our calls on equities were negative this quarter. Our strategy of selling the weakest stock markets in preference to the strongest proved once more to be a successful trading adage. Whilst the largest loss in Eurostosxx, was due to the 200% short position at the end of the month, based on a potential diagonal triangle pattern which proved incorrect.

3.3.2 FX Markets

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The above chart shows the Dollar Swiss and the quarter's excellent trade locations within the bullish trend

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Our strategy was one of being medium-term long the Dollar for a correction, which worked well in the European Dollar pairs.As did our long sterling Crosses. Dollar Aussie became interesting as the commodity cycle turned lower. On the negative side Dollar, Yen is still a challenging pattern, and bitcoin did not reverse quite where we expected it to do so, but still looks set to fall to 30,000.

3.3.3 Bond markets

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We started the quarter bullish expecting one more new high on bonds, but after key levels were breached switched our view to bearish bonds  in March, recouping some of our losses.

3.3.4 EM Markets

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We made nice incremental gains across this sector in both EM currencies and equity indexes, with Dollar Turkey returning a bumper quarter. This sector has been leading the risk off/Bubble collapse.

3.3.5 Commodities

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Gold and Silver made solid returns in a messy sideways trading pattern. Whilst the other commodities gave small returns as we located our shorts too early before the reversals finally took place. Oil and copper were our best shorts.

4.0 Alpha Capture Funds Performance

Global Forecaster operates four fund portfolios for clients by applying GF trade recommendations.

4.1 Long Short (Square point)

A long-short fund of $200m with a max of 50 equity positions of $4m. A loss of $11,935,896 equates to a 5.9% loss.

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This fund suffered from the equity market rally in which our key short on oil and banks flew in our face in teh value switch 

4.2 Commodity (Square Point) - A Commodity Fund

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There we failed to effectively represent or  trade recommendations in this portfolio.

4.3 Top Macro (Client X)

A concentrated best of our macro ideas with zero leverage, which in the quarter actually represented our best performing trade recommendations, in a non leveraged portfolio.

Its key positions have been: Short WTI, gold silver NASDAQ FTSE, and Eurostoxx. 

The net loss over the quarter was 0.4% with the previous net return of 12%.on 8 months.

4.4 General Macro (Client Y)

Contains 80% of all the trades generated from equity indices, FX, bonds and commodities.

The returns over this quarter were negative ($3,008,594).

Sector and market of the Quarter. The above chart in gold  shows both the capture of the rally and the capture of the correction. A similar profile was achieved in the dollar.

Contents of this Q3 Review

1. Introduction.
2. The main geopolitical calls.
3. The market predictions and performance.
4. Funds and their performance.

1.0 Global Forecaster Introduction

Global Forecaster  was set up in the summer of 2019 to inform and advise professional asset managers through troubled waters. During this year, there were obvious indicators that global markets were soon to peak and collapse with the most grievous consequences. I have called this transition The Great Shift as it is driven by the hegemonic challenge of China to America and the West.

With one year of performance under my belt, the results in my geopolitical predictions, market predictions and fund performances have been very pleasing. My career as a principal risk taker in the hedge fund business has taught me that  the key to high returns and long term success is based on:

1. Prescient market views generated with a systematic multi-time frame and price modelling system
2. Good trade entry points with tight and structurally meaningful stops (entered with contrarian price modelling).
3. Appropriate position sizing.
4. Risk management in accordance with trends.
5. Successful trade exit points.

These five points describe my Global Forecaster methodology in a nutshell!

By reading the below quarterly performance appraisal you will have a better idea of how I apply my risk allocation methodology as well as how I combine geopolitical predictions using my various models from Breaking The Code of History. All of these real-time predictions have been published on the Global Forecaster site.I then go a stage further and apply these trades to different fund mandates. Track records are given below.

2.0 The Main Q3 Geopolitical Calls

1. Biden will win the election by a considerable margin. Contextually, this call was made back in January when Trump's re-election seemed inevitable and when no one was predicting Biden's victory. I based this call on the need of the American electorate for wealth distribution to keep them afloat. This view still stands.
2. Sino-Western polarisation accelerating swiftly as the effects of the pandemic worsen. Ultimately, China will be found guilty in Western courts and damages against the state will result in expropriations on Western soil. China will drive an accelerated arms race using its idle industrial capacity to build ships, missiles, planes, armoured vehicles and an amphibious capability. Faced with the overwhelming polarisation against China, President Xi could well choose the path of accelerated aggression. Taiwan is the most probable flashpoint. This is the biggest geopolitical shift of them all and it is unfolding at the rate I expected. My estimate is that 99% of all senior political and business leaders are underestimating this shift and its impact. Recent Murrinations give details of Xi’s future path for China as an internally fuelled consumer society that becomes fully militarised like Germany into 1939, which is effectively the road to war in 2025.
3. The delusional gap between economic reality and the stock market will close. The Phase 2 correction will end imminently and, following a sharp reversal sentiment, will swing to the other extreme during a six month decline of up to 80% from the February highs in European stock markets and only a slightly smaller fall in America. As the reality gap closes, the social mood of populations will become markedly darker and there will be increasing social unrest due to economic stress on the lower and middle classes. These classes will find a just cause to express their collective frustration and anger. Additionally, as the pressure builds there will be regime changes in countries with unstable economies (especially hydrocarbon economies). 
4. There will be very significant asset price deflation well before inflation becomes noticeable in shares, commodities and the property market. Gold and silver will be a major store of value and will appreciate 200%+. Expect this to unfold in the autumn as unemployment numbers increase.
5. The Pandemic will continue for 18-24 months until a vaccine is found or herd immunity is reached. Herd immunity is being bolstered through T cell immunity which is not as of yet tested. I estimate that with T cell immunity the herd immunity levels are at least double the published figures. I am not confident that we will see an effective vaccine until next year.
   1. There will be secondary and tertiary waves. We are currently in wave two.
   2. Governments will have to become more effective at constraining the pandemic, locating new virulent strains and keeping the economy operating. This is happening in the East at present, but not in the West.
   3. Testing (including for new strains) and tracking must be greatly enhanced. 
   4. Nations will effectively be operating a strategy of accelerated phased exposure to herd immunity. 
   5. A global response to the pandemic could and should be led by Britain. This will exclude China and possibly America (by its own choice). 
   6. There will be a powerful drive for greater personnel responsibility for health and wellbeing driven by government programmes. As smoking has died a social death, so too will obesity. We are seeing this now
   7. There needs to be more focus on the inevitable mutations of the virus into a multi-strained simultaneous pandemic. 
   8. In Western societies there could be long term health benefits as populations are encouraged to take self-responsibility for their health. 
6. The lock down strategy of Western governments will in time be viewed as a misguided response that equated to economic suicide. This is because lock down failed to balance the overall relatively low death rate of the majority versus the high magnitude of economic destruction. By focussing on the preservation of the older, less productive population, governments have sacrificed the future for the younger population. The failure by Western governments to respond holistically illuminates both the predominant left-brained thinking process and the influence of the madness of collective behaviour. Governments should have resisted this with clear strategic leadership.
7. There will be a sovereign debt crisis in Italy and/or Spain. The German Supreme Court will do all they can to resist the ECBs support of the Italian bond market. Bond yields will rise considerably by the years end. America will also be at risk to a sovereign bond crisis and ultimate restructuring. Bond yields will rise not due to economic recovery, but due to the risk of holding debt. 
8. America's role as the global hegemony will continue to wane. Trump will not be elected again. New non-American alliances will evolve. The dollar will fall by 20-30% against the major currencies.
9. The EU will fracture from its current structure and devolve to national levels. This will be triggered in the  later stages of Brexit. Moreover, Brexit will happen on terms that benefit the UK as the EU’s position weakens. The vacuum created by the shrinkage of American global influence and the accelerated Chinese coercion of other nations could provide Britain with a massive opportunity to strengthen its global links with the Commonwealth and establish a new global trading network. Britain will hold the upper hand in the Brexit negotiations. While a no-deal outcome is probable (as the economic environment worsens in the next six months) the EU will find they have the weaker hand and thus will yield to British demands at the last moment. Sterling will appreciate more than any other currency in the world during the next 6 months rising to Cable 1.60 plus and against the Euro to 0.65. Exporters, be warned and prepared. 
10. There will be social unrest in Russia. Resultantly, there is a high probability that Putin will be displaced. Such an eventuality would provide the strategic opportunity to entice Russia back into the Western fold.  

3.0 The Q3 Market Predictions

3.1 GF Methodology

I have been a macro asset manager for over 35 years. I know there is a big difference between having an idea and translating it into profit. My Arkent and Market Analysis Services are designed to do just that.

Over the past 12 months I have evolved my risk system into the one described below. The trade performance tables represent this standardised system.

To remind you of how it works, each idea has a risk unit, defined from the entry point to the stop level, and a trade idea in one market can have a maximum of 100% which equates to 10 risk units at any one time. Trade recommendations can be  either 33.3%, 66.6% or 100%. The 100% limit in a market can be put on all at once or in combinations of 33% and 66% sub trades. For example, T12a, T12b and T12c would be three 33% trades in one market and for one idea. High conviction trades require  the time frames of short, medium, and long to all be aligned. Notably, in 2020 Q3 the conviction levels were very high due to the high and integrated signal strength associated with my Phase 3 roadmap.

My trading strategy is to trade in alignment with long term directions and trends and then find short term entry points that translate into long term time frames that produce tight risk rewards on entry as well as high multiple risk returns. The tight risk rewards on entry may mean that an entry point needs to be attempted several times. A spreadsheet is available on request to explain all the trades which are displayed on the site and the summary tables below.

I then go a stage further, taking my trade recommendations and applying them to specific fund structures such as Top Macro, General Macro, Long Short and Commodity funds operated on behalf of clients. The history and performance of those funds is given below. 

3.2 Top Performing Markets Over the Past 12 Months

As an example of how the Global Forecaster risk system works I have included a table of my top performing markets. Take the FTSE as an example where 763.2 risk units were generated over 12 months. This  equates to a 76x return on a 100% trade of 10 units. In reality, as some of the units would have been 33% and 66% this will underestimate the return. Even so, 76x is a massive number. Even a 13x multiple represents a very significant return at the bottom of the table.

Another clear pattern that this table demonstrates that my predictive systems work in all the asset classes that I cover. This is conditional of course on directional movement which has a cyclicity of fallow periods and fertile periods. Key to this system is avoiding the fallow periods that eat up energy and capital with no return, focusing instead on the fertile periods in sectors. This is key to consistent overall portfolio generation.

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3.3 General Appraisal of Q3 Performance

Most of my predictions have or are unfolding as expected in the Phase 3 market fall. As per my Arkent scenarios, the dollar is accelerating to the downside with gold and silver rallying. Whilst the weak stock markets like the FTSE and Spain (charts below) are already well off their weak rebound highs and coiling to fall, the US markets have reversed. Commodity markets are falling which signals a second demand slump in regard to oil.

3.3.1 Equity Markets

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The Above Chart Shows the FTSE 100 and the quarters short trade locations.

My strategy of selling the weakest stock markets in preference to the strongest ones proved to be a  successful trading adage this quarter. It also did in 2020 Q2 when the weakest markets dropped the furthest distance. In the strongest markets which were in the US, the returns were low to slightly negative. However, in Europe where I highlighted the weakest indices, this key determination combined with excellent entry points at the peak of Phase 2 have generated excellent returns.Going into Q4 I am max short on all the stock indices and expect a powerful decline.

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3.3.2 FX Markets

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The above chart shows the Dollar Index and the quarters trade locations.

My strategy of being short on the dollar from the start of the quarter has paid hansom dividends as I stayed in the trend to the September lows. Here, I covered shorts and then entered some small trading long-dollar positions and then reset the short positions at the high of the corrections with the expectation that  the trend will resume in Q4. Notably, through this more pronounced European dollar correction I remained short in dollar yuan as the trend was so powerful. The cross AUD/NZD was introduced this quarter with some good results.

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3.3.3 Bond markets

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The above chart shows the Bunds and it's triangular structure with low volatility and very little trading opportunity.

These markets were trapped in their triangle and as such provided very little opportunity. However, the breakout in late Q3 should provide a powerful rally in Q4.

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3.3.4 EM Markets

This is a new dedicated section this quarter, building on the successful EM FX analysis over the past 12 months and adding some major equity indices.Three of these have started to yield results and once more the weakest in SA has proven the best medium for shorts. Meanwhile, the EM FX section showed a moderate net positive. I expect all EM sections with short equities and local currencies to produce significant returns this quarter.

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3.3.5 Commodities

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Oil is shown above with is diagonal triangle and break lower. Gold is shown at the start of this appraisal.

This sector has been the best performing of the quarter, especially in gold and silver as I captured the rally, exited at the peak, went short a trading position and then reloaded at the lows expecting a rally in Q4. Oil was next in return productivity and despite requiring a number of short positions to locate a 100% short position, the final trade before the fall was at the highs with a tight risk return that produced an excellent profit and has much more to go in Q4.

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4.0 Funds Performance

Global Forecaster operate four fund portfolios for clients by applying GF trade recommendations.

4.1 Long Short (Square point)

A long short fund of $200m with a max of 50 equity positions of $4m.

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This fund has had an excellent quarter based on short oil and banking stocks as well as capturing the long gold and silver stock rally top to bottom, yet exiting at the highs to avoid the drop. Short tech stocks was added in September.

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4.2 Commodity (Square Point)-A commodity Fund

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There were few technical problems that prevented the capturing of the gold and sliver rally and the Oil drop, but none the less it was a marginally profitable quarter that should have been exceptional.

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4.3 Top Macro (Client X)

A concentrated best of my macro ideas with zero leverage.

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This has had an excellent four months. Its key positions have been:

1. Long gold and silver capturing the big rally and exiting at the highs.
2. Short silver for the corrective drop.
3. Long silver from the September lows.
4. Short WTI and brent from the highs.
5. Short FTSE and Eurostoxx from the highs.

4.4 General Macro (Client Y)

Contains 80% of all the trades generated from equity indices, FX, bonds and commodities.

I only commenced operation of this platform in September, but have quickly moved up to between 6th and 3rd out of 52 on the platform based on returns and sharp ratios. More to follow!