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Pandemic and false prophets: Why conspiracy theories are dangerous?

By Marius-Cristian Frunza
Weekly Briefs

Covid-19, 5G, global experiment, vaccines with nano-chips, Bill Gates, reptilians, global government, end of freedom… Over the last weeks, media platforms were flooded with several underground conspiracy ideas that became in the context of the current lockdown almost mainstream. In a nutshell, these conspiracy theories propagated since the beginning of the pandemic are nothing more than a regurgitation of some old ideas from apocryphal gnostic textbooks, excerpts from "The Morning of the Magicians" and quotes from "The Matrix", all adapted to the current state of affairs. Since the early days of our era, eschatology always had its place amongst philosophers and novelists. But, with the development of the on-line media, eschatology became a business and the current lockdown is the ideal marketplace to capitalize on such ideas. They exploit the fear factor, the herd panic, and the unrest of a part of the population touched by economic depression. The bottom line is that all these theories do not change the situation and those who propagate them are not able to do much other than capitalizing on their social media.

The real issue is that the spread of these theories is harmful.  They make no distinction between imagination and reality, theory and fact, mysticism and science.  Denying the pandemic or associating a matter of public health with new technology like the 5G has no real background. The only result is that they amplify the fear in the population and undermine the role of authorities.  

Therefore, propagating these ideas in the name of the freedom of speech is not only dangerous but should be forbidden.

Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves.
Matthew 7:15

Market overview

The macro-economic data for the first quarter show that the US economy contracted with 4.8%, while Eurozone's economy lost 3.8% of GDP. We should expect a more significant contraction for the second quarter for several reasons. First, the unemployment effect should kick-in once the lockdown is over. Second, some industries, including tourism and catering, could experience zero turnovers for at least a few months.

Last but not least, the spillover effects could significantly impact the services sector that was, in theory, less affected by the pandemic.
Spillover effects are always tricky to analyse because they hit with various lags. Therefore, even in safe-havens like Luxembourg, Singapore or Switzerland, the crisis effects could hit in a few waves. The economic crisis could unfold over 12 months before touching the bottom.
So, what is the best investment at the moment? The best investment for a layperson is self-preservation. Moreover, like always, cash is and will be king.

Cryptocurrencies:

There can be only one

After hitting a critical low at the beginning of the pandemic, Bitcoin recovered spectacularly and returned where it was before the crisis. There are no fundamental reasons to explain the existence of a myriad of coins in the crypto-universe. The current crisis may bring a necessary consolidation, reinforce the position of the leading coins, and push towards the exit the smaller altcoins. The market signals seem to confirm this scenario. Bitcoin had the best recovery amongst the leading coins, while Ether or Litecoin do not seem to follow optimistic patterns.

Commodities:

Oil prices, Covid-19 and the Ukrainian revolution

During the 2008 crisis, the oil prices dropped from a historical peak of 150 USD to below 40 USD. Despite that colossal fall, the oil industry did not feel threatened, and the oil market rebounded in the following 6 months.

The current market contraction is smaller, but it pushed the oil prices to a level where a lot of drills and shale operations became not sustainable in the foreseeable future. In the early 2010s, oil prices exhibited a significant correlation with the stock market and shared a bullish pattern with the leading equity indices.  The 2014 Ukrainian revolution was a game-changer for the dynamic of the energy market. The oil prices plummeted significantly below the 40 USD level and decoupled from the stock market. After 2014, the oil market had hectic behaviour, and the current pandemic found it in a rather weak position.

The current dramatic drop in oil prices that pushes the oil companies at the edge of sanity is not the consequence of the current crisis. The industry is paying the consequences of the 2014 crisis that pushed the entire energy industry in uncharted waters.

Focus:

Shale oil in murky waters

The US government is considering bailing-out shale oil companies. Indeed, leaders of the fracking sector, including  Pioneer Natural Resources and Continental Resources(CLR) suffered massive losses on the stock exchange. With crude oil prices below 40 USD, this industry remains indefinitely under lock-down, thereby threatening the US position on the global energy market.

Moreover, big companies like Exxon(XOM) have also asked for Federal help, so there are chances to witness a wave of nationalisation in Trump's era.

Market outlook

As predicted the Bitcoin found support at 9000 USD and the Brent continued to progress into positive territory. The Dow Jones climbed above 24,000 and may find some support in the short term, but the likelihood of finding long-term support at this level is low. We expect to see Bitcoin moving north above 10,000 USD, and the Brent crude to progress slowly towards 33 USD per barrel.

General Disclaimer

The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial in- strument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.

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