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On the Precipice: Will Global Markets Follow Commodities? [Chart]

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On the Precipice: Will Global Markets Follow Commodities? [Chart]

On the Precipice [Chart]

Will global markets follow commodities off the cliff?

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

From 1970 to 2004, commodities moved the opposite direction of assets like equities and bonds. For example, it was during times such as the 1990s that cheap inputs like oil and metals helped to fuel growth in industries across the globe.

When the oil price spiked, like in instances such as the Iranian Revolution and the subsequent Iran-Iraq War in 1980, the market reacted accordingly. In that particular case, inflation jumped to 11.3% in 1979 and 13.5% in 1980, a US recession was triggered, and many economic sectors were hit hard.

However, as we see in today’s chart, from 2001-2012 commodities (as measured by the Bloomberg Commodities Index) have more or less kept in line with the S&P 500. This is historically unusual and many analysts expected it would not last. In 2012, commodities diverged in a big way.

Gold and silver were the first to drop off. More recently, it was base metals and oil that fell off the cliff because of slowing growth in China and supply gluts. Today, the Bloomberg Commodity Index and the TSX Venture Composite Index are lower than they have ever been since their inception. The former is down -19.9% from the beginning of 2001. The Venture is down -40.1% since then.

Today may be the end of this trend of divergence. US equities are at a precipice: fueled by low rates and quantitative easing for years, they have finally started to tumble from record highs. Yesterday, the Dow had its largest one-day drop since April 2014 as it slid 350 points. Even tech darlings were down as $49 billion in market capitalization was wiped out, with Apple, Google, Netflix, Facebook, and Twitter all getting crushed in trading yesterday. Market sentiment is decidedly worse than it has ever been in recent years with the tailwinds of Greece, Puerto Rico, China, and other problems.

Making predictions are the dumbest possible idea, but they say that fortune favours the brave.

So here are some bold predictions:

Gold will at least hold its current value, if not see gains in the upcoming six month. US equities do not see sizable gains for awhile. The Fed does not hike rates in September (or if they do, it will be to a lack of fanfare from the markets). Industrial commodities like base metals will continue to drop off a little further as the overall market feels like it has lost momentum and supply gluts remain supreme.

What do you think will happen in the short and medium term?

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Economy

The $300 Billion Counterfeit Goods Problem, and How It Hurts Brands

Every year, the global economy loses over $300 billion from the sale of counterfeit goods. Here are the problems created by this, and why they matter.

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When you are walking along the boardwalk on vacation, you know it’s a “buyer beware” type of situation when you buy directly from a street vendor.

Those Cuban cigars are probably not Cubans, the Louis Vuitton bag is a cheap replica, and the Versace sunglasses too cheap to be the real thing.

But what if you placed an order for something you thought was truly legitimate, and the fake brand had you fooled? What if this imitation product fell apart in a week, short-circuited, or even caused you direct harm?

Can you Spot a Fake?

Today’s infographic comes to us from Best Choice Reviews, and it highlights facts and figures around counterfeit goods that are passed off as quality brands, and how this type of activity damages consumers, businesses, and the wider economy.

The $300 Billion Counterfeit Goods Problem, and How It Hurts Brands

In 2018, counterfeit goods caused roughly $323 billion of damage to the global economy.

These fake products, which pretend to by genuine by using similar design and packaging elements, are not only damaging to the reputations of real brands – they also lead to massive issues for consumers, including the possibility of injury or death.

A Surprisingly Widespread Issue

While it’s easy to downplay the issue of fake goods, it turns out that the data is pretty clear on the subject – and counterfeit goods are finding their way into consumer hands in all sorts of ways.

More than 25% of consumers have unwillingly purchased non-genuine goods online – and according to a test by the U.S. Government Accountability Office, it was found that two of every five brand name products they bought online (through 3rd party retailers) were counterfeits.

Some of the most common knockoff goods were as follows:

  • Makeup – 32%
  • Skincare – 25%
  • Supplements – 22%
  • Medication – 16%
    • Aside from the direct impact on consumers and brands themselves, why does this matter?

      The Importance of Spotting Fakes

      Outside of the obvious implications, counterfeit activity can open up the door to bigger challenges as well.

    • Economic Impact
      On a macro scale, the sale of counterfeit goods can snowball into other issues. For example, U.S. accusations of Chinese manufacturers for stealing and reproducing intellectual property has been a major driver of tariff action.
    • Unsecure Information
      Counterfeit merchants present higher risks for credit card fraud or identity theft, while illegal download sites can host malware that steals personal information
    • Criminal Activity
      Funds from illicit goods can also be used to help bankroll other illegal activities, such as extortion or terrorism.
    • Unsafe Problems
      It was found that 99% of all fake iPhone chargers failed to pass critical safety tests – and 10% of medical products are counterfeits in developing countries, which can raise the risk of illness or even death.

    The issue of fake goods is not only surprisingly widespread in the online era, but the imitation of legitimate brands can also be a catalyst for more serious problems.

    As a consumer, there are several things you can do to increase the confidence in your purchases, and it all adds up to make a difference.

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Bitcoin

The Beginning of a Bitcoin Bull Run?

After 15 months of losses and stagnation, Bitcoin has made a miraculous recovery — going on a 150% bull run since its lows in December 2018.

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The Beginning of a Bitcoin Bull Run?

After 15 months of losses and stagnation, Bitcoin has made a miraculous recovery — rising more than 150% from its lowest point in December 2018.

In its heyday, Bitcoin had surpassed $10,000 in early December 2017, before briefly crossing the $20,000 mark for a single day on December 17th. A year later, the digital currency had fallen back to Earth, dropping below $3,200.

Now that the dust of that wild speculative frenzy has settled, Bitcoin is back on the upswing. What could be causing this most recent surge in growth?

We look at four possible explanations for the Bitcoin bull run, as originally outlined by Aaron Hankin at MarketWatch:

Technical Milestones

Bitcoin has seen several technical milestones this year, such as surpassing the psychological barrier of $5,000 in early 2019, breaking the 200-day moving average, and scoring the golden cross (when the 50-day moving average crosses above the 200-day moving average).

Widespread Adoption

Bitcoin is experiencing a steady increase in adoption across several markets. The term Bitcoin has become a household name — even if people don’t understand what it does, they know what it is.

Companies such as Starbucks, Microsoft, and Amazon, and Nordstrom are looking for ways to integrate cryptocurrencies into daily transactions for faster payment clearance, innovative rewards programs, and efficient customer service interactions.

bitcoin merchants

Shifting Sentiments

Bitcoin has possibly seen a shift in public perception. There have been fewer negative articles about Bitcoin and cryptocurrencies, and the news stories that are negative no longer have as big of an impact as they once did.

When Binance announced hackers stole $40 million in bitcoin and when accusations of an $850-million cover-up were leveled against Bitfinex and Tether, the Bitcoin bull run barely flinched and continued to climb.

Wavering Gold Investment

Investor confidence in gold has been more stagnant in recent times. To capitalize on this, Grayscale Investments (of Digital Currency Group) posted a campaign in May 2019 promoting Bitcoin as an ideal alternative to gold because it is borderless, secure, and more efficient for storing value.

Despite the World Gold Council’s response denying those claims, the Grayscale Bitcoin Trust saw OTC Markets Group’s highest trading volumes five days later.

Where to from here?

After a long skid, it appears Bitcoin is showing signs of life again. Bitcoin’s price can be highly volatile, so it remains to be seen whether this is the beginning of a bull run, or whether this is just another bump in the roller coaster ride.

Editor’s note: The price of Bitcoin has fallen to $7,100 at time of publishing and will likely continue to experience extreme volatility. However, even at a price of $7,100, this is still a 120% increase from lows in Dec 2018. As well, an earlier version of this graphic had incorrect dates on the timeline. That has now been corrected.

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