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Market Lab Report - BRICS; banking woes; shorting opportunities

Market Lab Report

by Dr. Chris Kacher

The Web3 Evolution Will Not Be Centralized™


BRICS now has six new members: Iran, Saudi Arabia, Egypt, Ethiopia, Argentina, and the United Arab Emirates. Their share of global GDP now surpasses that of the G7 nations (32.1% vs 29.9%).

The world indeed looks somewhat equally divided between G7 and BRICS countries in terms of oil production (46% vs 54%) and population (54% vs 46%).

BRICS is actively reducing reliance on the dollar by promoting global trade as they dominate key trade routes including the Artic Sea Route, Persian Gulf, Red Sea, Suez Canal, and others. 

While this goal may eventually be reached, the dollar's global dominance will take significantly longer to topple than mainstream media would have you believe. Each BRICS country has its own geopolitical priorities. The majority of respondents in India, Brazil, and Argentina think China would barely take their own country’s interests into account when making international policy decisions. Further, the US dollar accounted for around 90% of global forex transactions in 2022 and 59% of foreign exchange reserves in Q1 2023, surpassing the renminbi's scant 2.5% share. So until BRICS countries can form a true synergistic alignment, the dollar will likely remain top dog for at least another decade or two. That said, a mega black swan where fiat currencies begin hyperinflating away would increase the odds of Bitcoin becoming the world's sovereign currency. 

Banking woes

XLF tracks the financial sector of the S&P 500. This includes companies involved in financial services, insurance, banks, mortgage real estate investment trusts (“REITs”), and consumer finance. Because rates shot higher in record time since 2022, these companies lost big sums resulting in the largest banking collapses in history. You can see the other shoe has yet to drop based on how weak the XLF is compared to other indices such as the S&P 500 and even the lagging NYSE Composite, the broadest measure of US stock market performance. Indeed, the XLF has yet to hit higher highs. It closed below its 50-dma on Tuesday.

Even worse off is the IAT ETF which tracks the performance of the smaller US regional banks. Such were hit hardest compared to larger banks which have more headroom and reserve. The daily chart (not shown) shows resistance at its 50-dma.

Other sectors are also showing topping activity. In consequence, we have recently sent members a number of short selling opportunities in specific stocks.
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