Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>Rising Liquidity drives higher gold price</li>
<li>Gold looks undervalued  against existing pool of liquidity</li>
<li>Liquidity itself is too low relative to massive debt burden (US 370% GDP)</li>
<li>Large outstanding stock of debt implies that gold price could rise to US$2500/oz</li>
<li>Gold price could be 40% undervalued</li>
</ul>


Rising Liquidity drives higher gold price
Gold looks undervalued  against existing pool of liquidity
Liquidity itself is too low relative to massive debt burden (US 370% GDP)
Large outstanding stock of debt implies that gold price could rise to US$2500/oz
Gold price could be 40% undervalued


Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

<a href="https://www.smartkarma.com/entities/s-p-500" target="_blank" data-smartkarma-citation="entities:22886:1" rel="noopener">S&amp;P 500 (SPX INDEX)</a> fourth failure at 3,120-40 did initiate our game plan to reduce longs and raise short bets in the US, Europe and Asia. Call for a rally from 3,003 support (low at 3,005) to trade risk higher (ASX, DAX, DJI) to 3,080 and the zone to add to short protection established in late June and reduce long exposure further. Staying below 3,050 post bounce attempt sets a more bearish tone to test and break 2,950/40 pivot support with a C wave target near 2,850. Risk down to 2,750 if weakness below 2,900 is impulsive.
DJI, Russell underperform stance makes Russell our hedge/short vehicle but we have outlined SPX levels. NDX new high not confirmed by SPX or DJI (inter-market divergence) and the bend in the value trade that will resume in August. Fresh bear cycles were triggered in our insight <a href="https://www.smartkarma.com/insights/us-secondary-top-risk-and-value-play-break" target="_blank" data-smartkarma-citation="insights:40565" rel="noopener">US Secondary Top Risk and Value Play Break</a> on June 22.
Cycle - Late June secondary tops unfolding per our call to short and see a correction into early July. A drawn out slow motion overlapping correction could extend into mid-July. Tug of war between stimulus and new virus case may very well give us some noise to the downside in July.
This insight outlines recent short levels and our ideal July downside target to reverse to bullish barring a break below SPX 2,750 which would act as a game changing level.
Risk positioning on the short side fits with our bullish gold view <a href="https://www.smartkarma.com/insights/gold-breakout-with-copper-fade-sets-the-risk-tone" target="_blank" data-smartkarma-citation="insights:40571" rel="noopener">Gold Breakout with Copper Fade Sets the Risk Tone</a> , <a href="https://www.smartkarma.com/insights/asia-s-rally-into-sell-zones" target="_blank" data-smartkarma-citation="insights:40379" rel="noopener">Asia's Rally into Sell Zones</a> and <a href="https://www.smartkarma.com/insights/nikkei-23k-sell-zone" target="_blank" data-smartkarma-citation="insights:40564" rel="noopener">Nikkei 23k Sell Zone</a> . Top shorts in Asia are focused in HK, Singapore, Korea and Japan.
EEM chart outlines a July test on the 37.50 pivot support and make or break level for a Q3 rally cycle.

S&amp;P 500 (SPX INDEX) fourth failure at 3,120-40 did initiate our game plan to reduce longs and raise short bets in the US, Europe and Asia. Call for a rally from 3,003 support (low at 3,005) to trade risk higher (ASX, DAX, DJI) to 3,080 and the zone to add to short protection established in late June and reduce long exposure further. Staying below 3,050 post bounce attempt sets a more bearish tone to test and break 2,950/40 pivot support with a C wave target near 2,850. Risk down to 2,750 if weakness below 2,900 is impulsive.
DJI, Russell underperform stance makes Russell our hedge/short vehicle but we have outlined SPX levels. NDX new high not confirmed by SPX or DJI (inter-market divergence) and the bend in the value trade that will resume in August. Fresh bear cycles were triggered in our insight US Secondary Top Risk and Value Play Break on June 22.
Cycle - Late June secondary tops unfolding per our call to short and see a correction into early July. A drawn out slow motion overlapping correction could extend into mid-July. Tug of war between stimulus and new virus case may very well give us some noise to the downside in July.
This insight outlines recent short levels and our ideal July downside target to reverse to bullish barring a break below SPX 2,750 which would act as a game changing level.
Risk positioning on the short side fits with our bullish gold view Gold Breakout with Copper Fade Sets the Risk Tone , Asia's Rally into Sell Zones and Nikkei 23k Sell Zone . Top shorts in Asia are focused in HK, Singapore, Korea and Japan.
EEM chart outlines a July test on the 37.50 pivot support and make or break level for a Q3 rally cycle.

<a href="https://www.smartkarma.com/entities/gold" target="_blank" data-smartkarma-citation="entities:22870:1" rel="noopener">Gold (GOLD COMDTY)</a> has been a favored strategic long play from 1,268 and 1,470 and more recent long at 1,670 with a fresh upside bull cycle brewing.A fresh bull cycle in gold amid a toppy levels in copper set the tone for equity risk over the summer. An impulsive move through gold 1,750 would open the way for a power move higher.RSI resistance will act as the early warning bull trigger (above bull wedge resistance).Copper's trend resistance comes in near 270-275 and due for a stall with pivot support at 253 that will act as the inflection point for copper and risk.VIX is due for a base near the 30 after the June 11 upside impulse with a secondary rally expected in July where we align a secondary top failure in the SPX, trendline support and the critical 2,950 price inflection point.

Gold (GOLD COMDTY) has been a favored strategic long play from 1,268 and 1,470 and more recent long at 1,670 with a fresh upside bull cycle brewing.A fresh bull cycle in gold amid a toppy levels in copper set the tone for equity risk over the summer. An impulsive move through gold 1,750 would open the way for a power move higher.RSI resistance will act as the early warning bull trigger (above bull wedge resistance).Copper's trend resistance comes in near 270-275 and due for a stall with pivot support at 253 that will act as the inflection point for copper and risk.VIX is due for a base near the 30 after the June 11 upside impulse with a secondary rally expected in July where we align a secondary top failure in the SPX, trendline support and the critical 2,950 price inflection point.

Gold Breakout with Copper Fade Sets the Risk Tone

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/997/original/2020-06-15_11-08-56.png?1592186965" class="editor-image img-responsive" data-smartkarma-image-id="139997"></figure><div class="content-caption">Source: Japan Analytics</div>
STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated among larger Japanese companies. <a href="https://www.smartkarma.com/insights/japan-stress-tests-part-1-altman-z-scores" target="_blank" data-smartkarma-citation="insights:40180" rel="noopener">Part 1</a> looked at the time-worn Altman-Z Score for both manufacturing and non-manufacturing companies. In Part 2 will we turn our attention to the cash flow statement starting with the 'lifeblood' of all businesses - Operating Cash Flow.
ACCRUAL ACCOUNTING - Despite the sacrosanctity in some quarters of discounted cash flow analysis, for valuation purposes, our preference is to use accrual accounting. As Professor Stephen Penman states, "Accrual accounting brings the future forward in time and anticipates future cash flows."  Nevertheless, cash flow accounting, and the level of accounting accruals, can provide early insights into periodic stress. <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)'s</a> Accruals (Operating Income less Operating Cash Flow) as a percentage of period-end market capitalisation correlate with the company's Relative Price Score over the last thirty years. Further Insights in this series will continue to 'mine'  the Cash Flow statement by exploring Financing Cash Flows and the Working Capital Cycle.
REFORMULATED CASH FLOWSTATEMENTS - Our Operating Cash Flow calculation is derived from each company's Balance Sheet and Income Statement for periods of up to twenty-eight years. Cash Flow items relating to operating activities are divided into Operating Cash Flow and Investing Cash Flow, which includes Fixed Asset and Inventory Cash Flows.  Cash flows relating to financing activities are divided into Financing Cash Flow and Shareholder Cash Flow. The reformulated Balance Sheets, Income and Cash Flow Statements follow a clean-surplus relationship. All three Statements are fully articulated to include items of Other Comprehensive Income which are added to or subtracted from Shareholders' Equity. 
</div>UNIVERSE - The universe for this Insight comprises the 614 Japanese companies with a market capitalisation excluding Treasury Stock over ¥100 million and for which we have at least two years of cash flow data.  Five non-financial companies, which have significant financial subsidiaries (<a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>, <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP)</a>, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>), have been excluded from this analysis.


Source: Japan Analytics
STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated among larger Japanese companies. Part 1 looked at the time-worn Altman-Z Score for both manufacturing and non-manufacturing companies. In Part 2 will we turn our attention to the cash flow statement starting with the 'lifeblood' of all businesses - Operating Cash Flow.
ACCRUAL ACCOUNTING - Despite the sacrosanctity in some quarters of discounted cash flow analysis, for valuation purposes, our preference is to use accrual accounting. As Professor Stephen Penman states, "Accrual accounting brings the future forward in time and anticipates future cash flows."  Nevertheless, cash flow accounting, and the level of accounting accruals, can provide early insights into periodic stress. Nissan Motor (7201 JP)'s Accruals (Operating Income less Operating Cash Flow) as a percentage of period-end market capitalisation correlate with the company's Relative Price Score over the last thirty years. Further Insights in this series will continue to 'mine'  the Cash Flow statement by exploring Financing Cash Flows and the Working Capital Cycle.
REFORMULATED CASH FLOWSTATEMENTS - Our Operating Cash Flow calculation is derived from each company's Balance Sheet and Income Statement for periods of up to twenty-eight years. Cash Flow items relating to operating activities are divided into Operating Cash Flow and Investing Cash Flow, which includes Fixed Asset and Inventory Cash Flows.  Cash flows relating to financing activities are divided into Financing Cash Flow and Shareholder Cash Flow. The reformulated Balance Sheets, Income and Cash Flow Statements follow a clean-surplus relationship. All three Statements are fully articulated to include items of Other Comprehensive Income which are added to or subtracted from Shareholders' Equity. 
UNIVERSE - The universe for this Insight comprises the 614 Japanese companies with a market capitalisation excluding Treasury Stock over ¥100 million and for which we have at least two years of cash flow data.  Five non-financial companies, which have significant financial subsidiaries (Rakuten (4755 JP), Z Holdings (4689 JP), Japan Post (6178 JP), Softbank Group (9984 JP) and Sony (6758 JP)), have been excluded from this analysis. 

🇯🇵 JAPAN - Stress Tests Part 2 - Operating Cash Flow & Accruals

<ul>
<li>V-shaped rebound confirmed. Global Liquidity Index (GLI) rises again to 85.1 (‘normal’ range 0-100). In US$ terms Global Liquidity could soar by 30-40% in 2020 to some US$190 trillion</li>
<li>
US Fed Liquidity Index hits 90.3 and Balance Sheet likely to test US$10 trillion in 2020</li>
<li>This will push the equity/ liquidity ratio down to near historic lows at 0.37 times. It shows how skewed portfolios are towards ‘safety’ and by corollary by how much investors’ mood is depressed</li>
<li>
Yield curves have further to steepen. US curve could add 150bp of steepening
</li>
<li>
Capital flows into US dollar show clear signs of rolling over. Gold/ Euro attractive</li>
</ul>


V-shaped rebound confirmed. Global Liquidity Index (GLI) rises again to 85.1 (‘normal’ range 0-100). In US$ terms Global Liquidity could soar by 30-40% in 2020 to some US$190 trillion

US Fed Liquidity Index hits 90.3 and Balance Sheet likely to test US$10 trillion in 2020
This will push the equity/ liquidity ratio down to near historic lows at 0.37 times. It shows how skewed portfolios are towards ‘safety’ and by corollary by how much investors’ mood is depressed

Yield curves have further to steepen. US curve could add 150bp of steepening


Capital flows into US dollar show clear signs of rolling over. Gold/ Euro attractive


United States

Gold is a chemical element with the symbol Au (from Latin: aurum) and the atomic number 79. In its purest form, it is a bright, slightly reddish yellow, dense, soft, malleable and ductile metal. Chemically, gold is a transition metal and a group 11 element. It is one of the least reactive chemical elements, and is solid under standard conditions. The metal therefore occurs often in free elemental (native) form, as nuggets or grains, in rocks, in veins and in alluvial deposits. It occurs in a solid solution series with the native element silver (as electrum) and also naturally alloyed with copper and palladium. Less commonly, it occurs in minerals as gold compounds, often with tellurium (gold tellurides).

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Gold (GOLD COMDTY)

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