The previous crisis marked by Lehman's bankruptcy, taught us that money has no value. We discovered negative interest rates and learnt that you may need to pay debtors when you lend them money. With negative yields, central banks put in place a sort of tax on liquidity, a fee that cash owners need to pay to hold their funds in a bank.
The current crisis brought a new paradigm shift: physical assets with negative prices. For the first time in history, an asset traded at a negative price. The primary U.S. oil contract closed at a negative price, plummeting to -37.63 USD for a barrel. Interestingly, oil is one of those assets having a well-defined fundamental value, related to the marginal cost of extraction and the marginal consumption value.
When its trading range tested the upper limit in May 2008, the barrel reaching 150 USD, it was hardly conceivable to see the price below zero. Analysts pointed out that it is just a technicality, but this event is redefining what the term asset means. The sale of an asset that requires the owner to pay the acquirer, and not the opposite, reshapes the concept of ownership. The only item that requires its possessor to pay upon disposal is a penalty or a tax note.
Negative asset prices mean that possessing an asset is automatically implying a tax or penalty for its owner. If the negative prices expand, in the same way the negative interest rates did, we may witness an economic revolution, implying the end of modern capitalism and rolling out the red carpet to crypto-currencies.
The astrological Age of Aquarius is believed to bring a massive change. Possession, wealth and social hierarchies may disappear. Digitalisation, Artificial Intelligence and equalitarianism may become the new norm. The consensus among scholars suggests that approximated dates for entering the Age of Aquarius range around the year 2000. The fact that assets, commodities and cash are losing their intrinsic values may be a sign that we are entering in this new age.
Imagine no possessions
I wonder if you can
No need for greed or hunger
A brotherhood of man
Imagine, John Lennon
The stock market consolidates its position amid turmoil on oil markets. The Fed's injection with liquidity heavily sedated the market. Thus, it is not unthinkable to observe a further move into positive territory. The significant correction should occur the day the Fed stops the tranquillizer.
While traditional markets are still waiting for signs about the shape of the future, Bitcoin has found a support level at 7,500 USD and has good perspectives to continue its progression.
The saga of the inglorious turf war between Gilead and Novartis continues. A document published online by mistake by the World Health Organisation stated that Gilead's Remdesivir does not benefit severe coronavirus patients. Following the announcement on Thursday, Gilead's share dipped 6%. Meanwhile, Novartis progresses in positive territory after reaching an agreement with the US Food and Drug Administration (FDA) to proceed with a Phase III clinical trial of hydroxychloroquine.
Since the beginning of the crisis, wheat prices remained stable and reached 195 USD per ton on CBOT. The main commodities index GSCI retreated since March, driven by lower oil prices. The ban on grain export in several countries and the increase in demand during lockdown supported the relatively high wheat price.
The stock market ended the week directionless, conserving almost all gains from the previous two weeks. As we predicted, Bitcoin and gold closed into the green. Bitcoin has good perspectives to test the 8,000 USD level. We expect oil to regain some of the last week losses.
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.