Apr 18 2017 11:40 am

The Elephant Is the Ant

Have you ever thought about how methods of payment influence geopolitics and wars, how about vice versa?

Sometimes, mergers and acquisitions can be influenced directly by global politics. Here's one particularly interesting and extremely relevant example...

The company formerly known as AliPay has just beaten Euronet in a bid to buy MoneyGram. IF the deal passes regulation, Ant Financial will pay about $1.2 Billion for a payment service that currently works with 350,000 locations in 200 countries.

Let's think about this, a monster Chinese company called Ant wants to buy a Texas-based global network. Ant wants the deal so bad that they're willing to outspend a company called Euronet Worldwide, which is based in Kansas.

You can't make this stuff up!

The CEO of MoneyGram has already blessed the deal, but US regulators might not be so quick to do so. After all, the Trump administration might be preparing for a trade war with China, and handing them a global payments network would certainly be poor positioning for the upcoming fight.

What is clear here are the hidden motives. Ant Financial is a company that is heavily invested in the blockchain. The only reason they're interested in MoneyGram is for their partnerships and for the network. If obtained, they'll easily be able to streamline the process, bringing down costs and timeframes and squashing the Western Union, possibly in a matter of months, cornering the offline payments market.

Not that it will matter much. People are rapidly realising that they don't need a physical location to transfer cash from one place to another. The amount of money currently stored in digital coins has reached a new high of $29.25 Billion this morning, a number that has been rising steadily over the past two years. With or without Ant's contribution, that number will need to rise rapidly in order to support a globally digital economy.

-Mati

Today's Highlights

  • King Erdogan
  • Earnings Ahead
  • Big In Japan

Please note: All data, figures & graphs are valid as of April 18th. All trading carries risk. Only risk capital you're prepared to lose.

Market Overview

President Erdogan is claiming victory in the Turkish referendum, granting himself all the power that used to belong to Parliament, the Prime Minister, and the Turkish Judicial system. His claim that the referendum was done democratically is a bit self-contradictory as the event has reduced Turkish democracy to rubble.

Apparently, Donald Trump has called Erdogan to congratulate him. Trump may or may not like the situation but he's no dummy. The slim margin in Sunday's vote is likely to bring up a lot of questions and controversy. As the USA has learned over the past decade, it's better to have a stable leader that you don't like than no leadership at all. At least by endorsing King Erdogan Trump may be able to save himself a valuable card that can be played in a later round, we'll call it, a trump card.

Though everyone was watching, the markets have had zero reaction to the events in the Middle East over the weekend. There has been no mention on the eToro network of Erdogan, Turkey, or even Syria over the past week. Even the USDTRY wall where these type of discussions would normally be held is oddly silent.

The Focus

Investors are now firmly focused on earnings season. With stock valuations currently near all-time highs, Wall Street is in sore need of some confirmation bias.

With the Fed looking to raise interest rates and unwind their massively bloated balance sheet, it's going to take a lot of profits to keep the hot air inside the balloon but that's not to say it'll be a difficult task.

Many a bear have been outgunned by this raging bull market. There are some, like my friend @dimitrios1 who are still hanging on, for every trader shorting the indices there is a dozen who have a carefully picked stock portfolio who are not even considering to offload anytime soon.

For today, stocks are up, and safe havens like Gold and the Japanese Yen are down. Even the VIX has come off its high and now down to 14 points.

US Secretary of the Treasury Steve Mnuchin has again played ping pong with his boss. They seem to have this good cop bad cop thing going with the Buck. Trump keeps saying that it's too strong, and Mnuchin keeps countering with, it should be strong.

Together, and with a little help from the Fed, they've managed to keep the Dollar Index inside of a respectable range between 99 and 102.

USDollar
source: eToro

Pence in Japan

The role of Vice President of the United States is usually more ceremonious but once again the Trump administration is showing that they are unconventional. VP Mike Pence spent the weekend right inside the hot zone of South Korea.

Today Pence is in Tokyo today and has already met PM Abe and FinMin Aso. Discussions revolved mostly around North Korea. One thing they certainly did not discuss was this chart of the USDJPY...

USDJPY
source: eToro

With the Yen gathering strength in the face of global tensions and a seemingly new strategy from the Trump administration to walk back accusations of currency manipulation, there doesn't seem to be any need to call out Japan at the moment.

In fact, since the Yen broke the 109 mark, many analysts are pointing at the above chart and noticing that there isn't any support nearby. Clients in eToro are still long on the Dollar/Yen with 75% buying the pair.

Wishing you an amazing week ahead!!


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This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results. All trading carries risk. Only risk capital you're prepared to lose.

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