23-Oct-2022Welcome to the weekend Wall StreetUnderground update,...

23-Oct-2022

Welcome to the weekend Wall StreetUnderground update,

Disclaimer: This is a research letter with myown views, and opinions and do not constitute in any financial advice orinvestment advice, neither does it contain any confidential information or data. Utilisation of purely sentiment-based data with some “bland economists’ opinions and wall street and non-wall street institutional chatter for some added spice. Kindly read and enjoy.

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I have been quite busy with various projects fromClient Investment portfolio optimisation (due to market volatility) topotential Stock buy-back Institutional strategies hence my absence. I am also excited to discuss in this research paper and the potential advancements of the new Institutional Trading desk AI technology which has moved from the prototyping stage and into Beta testing phase. I do review HC posts when I can but have not posted my Research paper as there was a lot of news coming out (post CPI data, Fed rates, Reporting season). I have noticed on HC our Shareholders sentiments were particularly neutral and boarding towards pessimism, one can understand why. So, during my early morning rowing (sculling) in the beautiful harbour my mind was filled with optimism in this cloud of the US market pessimism. A healthy heart rate and free uplifted mind set works wonders.
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My last research paper was written regardingthe volatility in the markets (what goes around always comes around) hence theFerris wheel of Institutional Investments. This is where I had welcomed all SYA Shareholders into the ASX 200 where volatile emotions are implemented to create a volatile experience. Heaven and Hell all wrapped up in a ‘Butterfly’s Trade’. Time tested antics where consistency favours probability, patience runs for the hills, manipulation, and greed anchors in to create the Ferris wheel of Institutional investments. So, moving on from the effects of manipulation, let me present to you all something intriguing and what in the near future Trading Institutions will be adopting as Phase 1: High Frequency Cyclic Sentiment AI Trading
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“The Cycle of Sentiments” is a draft paperbeing produced to discuss how Institutions manufacture, rally, capitulate andmanipulate Market sentiments and create critical Market turning points throughthe Butterfly effect, Investment Ferris wheels, Iceberg orders, regular lowvolume trading flows, high frequency trades just to name a few along with thebest technique being Fear.

Today’s key topic of focus: The InstitutionalMachines of High Frequency Cyclic Sentiment Trading.

The Institutional Sophisticated and Sensitivebehavioural artificial intelligence machine: (Institutional Trader vs the new InstitutionalBehavioural Trading AI)
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Cycles are seen in the following forms:

Optimism => Enthusiasm => Exhilaration=> Euphoria => BULL MARKET ENDS

Unease => Denial => Pessimism =>Panic => Capitulation => Despair => BEAR MARKET ENDS

ThroughInstitutional education these cycles of sentiments were trained into all Humanbased Institutional Trading desks and Trading psychological behaviouralmechanisms. The same experience and education is now being programmed into the new Institutional AI Technology. This is the reason why one can generally notice patterns when total sectors go either in Red suddenly or Green suddenly and simultaneously. Currently, the control of whole market sectors is still extremely difficult as various methods and cross Institutional collaborations need to be utilised to orchestrate simultaneous patterns of volatility by sector.
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Welcome to the new Institutional BehaviouralTrading AI: These Cyclic phenomenas’ are being programmed into highlysophisticated sentiment behavioural artificial intelligence machines. The new Beta testing version of the Institutional High Frequency Cyclic Sentiment Trading AI (HFCST machines).

Level 1:

What is interesting is how the trading rulesare applied = Action to Reactions. Severe Actions to Repercussions. Group sentiment based on Positive or Negative behavioural correlations and Probability matrix programming. This guesses most accurately to what a Human decision would react to based on either a Positive sentiment or news vs a Negative sentiment or news. How group of traders in the market will digest sentiment and what actions will the Human Trader take. Will it be simply defensive (Hold), negative (Sell) or positive (Buy). How can Cash be evacuated out of the Stock Market and how to corral Investors to investment into other assets, Bonds, Gold, the Dollar shrouding behind the strategy of Hedging.

What is interesting is the methods, rules,actions to reactions which are like teaching a child to trade without any humanemotion. So the actions of the advance AI is to actually understand “Human Emotion” but exclude it completely during “Trade Executions”. No Fear, No Doubt. This is Level 1.

Level 2:

The Psychological impacts caused by a smallfinancial discomfort to extreme financial pain, what are the levers ofadjustments to create panic or exhilaration in the Market or in a particular Stock.Humans feel safer in groups (Traders, Investors, Institutions), the herd movesalways looking for a greener pasture (profits) be it Short or Long. The market is where Price points are determined a great price to the worst price. When machines interacted with other machines and they get a bad price they move on relentlessly looking for a better deal. But what we humans carry with us is our ‘Emotional baggage” we got a bad deal attitude. This affects our next move and the next. So, if most investment situations based on last 20 to 30 years’ worth of data, patterns, cyclic movements, inflation, great depression, positive market moves, weather, plagues, political outlooks, gold and commodity fluctuations, and herd behavioural trends are programmed systematically they could be able to create highly probabilistic decisions based on high frequency algorithmic machines. So welcome to Beta version of the Institutional High Frequency Cyclic Sentiment Trading AI (HFCST machines). This is Level 2.
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There is a Level 3 and 4 which is not in Beta(yet) but the programming door (API) is open to plug into. This is something I will hint about below.

The reason I bring up these intelligent AI machinesis because they will simply do they are programmed to do but the strategybehind such programs is where my research paper starts to shed light. Are they good or bad, the length of time will surely tell.
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The Future of the Digital AI Footprint:

These technologies “Will” morph and will workhand in hand with probabilistic control which we are already seeing enablementof the “Digital package” where “Digital / Programmable currency”, Locationtracking, Data on human buying and selling patterns, soon even more targetedadvertisements based on Bank Account balances and investment portfolios. You might have heard of ‘Open Banking”. These open banking systems are now connecting through FinTech firms separate from Investment banks, hence by certain banks are buying them up. These will integrate into further global financial systems where sharing protocols will become ownership of Institutions to make further profits. If you have seen profits so far made by Investment banks wait till level 3,4 start into production. The buying, selling, sharing of data has already started. Originally, hackers stole your credentials or information to be further sold on the market. Next step it moved into stealing large quantities of human data and sold. Now the data is being harmonised to give a sense of security. But eventually the data will be owned by Institutions through new Ts & Cs, but may I welcome you to the next steps.
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At the moment there is competition betweenInstitutions but soon Institutions will realise to work together to share theircustomers intention and strategy: The “Herd” direction. This will eventually happen based on Geographical based AI’s. Soon to trail a localised site data sharing between 2 large Institutions of client sentiments under a disclosure contract. If successful then a wider net to be cast across sections of a particular state, then move from state to state, then regionally through a country then with further collaboration of Institutions across borders. Why is it you see large GLOBAL Institutions give you LOCAL feel. A large Institution is spread across continents. I will stop here as this paper is not discussing Level 3, or level 4 and further but Level 1 and 2. But its good to understand the ramifications of technology in Institutional trading and eventually sharing with plug and plays (Open APIs).
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Current Institutional view of Equitiescapitalisation to GDP to Bond Yields:

The Global Median Trend is something tounderstand without a knee jerk positive or negative reaction. I have discussed the GMT in my previous research papers also. A view of how the Institutions are viewing the Market and one can see the volatility which is currently unfolding. Stepping back and looking at the first nine months of 2022, the S&P 500 lost a quarter of its value.
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Institutional thinking: Are stocks even moreovervalued today vs the beginning of the year? The Ratio of the S&P 500 Market Capitalisation to GDP has fallen from 180% to 140% so according to this measure currently Stocks are less expensive than they were before. But Stocks tend to vary inversely with Long Term Bond Yields and long-term bond yields have jumped to their highest in over a decade.
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A historical view:

If you analyse and adjust the S&P Marketcap to GDP ratio by the level of 10-year Bond yields Stocks were cheap comparedto Bonds in the 1950s and early 1960s and same was true during the lastdecade. During these times Stocks vastly outperformed Bonds but the opposite was true during the year 2000s where Stocks were highly valued versus Bonds. This is important to note: between 2000 and 2009 the Equity market lost 60% of its value while Bond prices weren’t a great deal higher. This year the rise in Bond yields have outpaced the decline in Stock prices. So when the Bond yield levels are adjusted, Stocks “appear” to be at their highest valuation levels since 2007 even in the Global financial crisis. As such unless Bond yields start to decline it might be premature to assume US Equities are a bargain at the moment. This is further overshadowed by the Fed hiking rates, fear of Recession and a delicate geopolitical landscape. But please also understand Fear creates what? A herd mentality to run with the herd. Every Investor must evaluate their positions but in moments of such Fear is also where Wealth is made.
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I am doing a research paper on Gold andfrankly the adjusted numbers and forecasts do not look to good (might bepremature to call that but so far it isn’t looking great. Institutional Hedging has already started to occur with the introduction of Goldman Sachs prediction of Lithium primarily focused on large number of mines coming online and cheap Chinese Lithium oversupply. What was interesting was that the Lithium market did fight back which was quite refreshing to see. But still look at the ‘Herd” mentality what happened to price of Lithium stocks during the news. So “herd” mentality is predictable through “fear”. Now these Intelligent AI’s are learning and learning quickly!
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There is a demand with a Capital “D” forLithium. Pilbara Minerals strategy is quite unique. The perception of a leader is to stands in the face of turmoil and turns it to his/her advantage. They have and are doing exactly this. Advertising their BMX Auction provides the greatest strength to Lithium and smacks hard the non-believers on their financial face. So there is incredible amount of funds sitting on the sidelines at the moment and the Institutions can see that, hence the deliberate buying of certain company stocks at a bargain price. So here come the Institutional Shorts, this is hedging at its pinnacle. Again, as herd mentality but Institutional shorts are extremely cautious as they have twice as much to lose. There is also a research paper in draft on Institutional shorts manipulation.
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Sayona:

The long run as most long-term shareholderswill know where Sayona’ SP is heading. I am reflecting the US Global Median Trend which is also shaping the SP of Sayona in this storm of volatility. Institutions know this and they are in the business of making money. So one needs to bring the price down to buy “silently” but while one brings the SP down they still make money. And coincidentally why did you see a predictable rally move S&P 500 and close around 3752 why? Fed pivot report or Options expiry perhaps? These spicy factors are inherent in the essence of the Market when money ‘needs’ to be made.
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Key messages outlined for Sayona Management tohelp with Market perception

1. Sayona needs to create its unique propositionthat carves out a significant place for herself. It’s not simply about producing, it’s about market perception as a leader and on top of that become a producer. Create the value, voice the value, deliver credible short-term movements towards the value and show future increments in the original value. Then continue it cyclically from voicing the value.
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2. Sayona needs to create Clarity hence adoptinga Management Communications Target Operating Model will kick start this Clarity. This could initially include by having a Data repository which is consistent. Each data system (CRM, Websites, Emails, Sales, Finance, strategic data, growth data) pools into a Data Hub. From the Data Hub utilising Analytics to project how the growth will be, how will be double, triple, quadruple and what are the paths to achieve them in a globally volatile US market ahead. In the future, I believe Mining CEO’s will need to articulate credibly (more than flat PowerPoint slides) but a multidimensional approach to where the Company is headed, why and the how? Most importantly CEO’s will need to understand what happens to their aggregated data when financial cycles change, or new strategies or crisis events are introduced. This will eventually become an industry solution. The same way when people made fun of Cars being introduced and replacing Horses, or the ICE factories / industry not understanding Refrigeration being available in every home. Clarity is key for any Investor or CEO.
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Structure = Plans = Unique Value Proposition= Execution PLUS Market Perception becomes your best friend. The Compounding factor takes over then.

The Market perception is king, marketyourself as a leader and one will have the Market eating out of theirhands. You can already see the US grant provided to Piedmont (not cross promoting). Money flows where interest is created, interest is created by standing just high enough out of reach and dangling bars of gold (with hollow insides) but in the case of Sayona it’s hard to dangle to many Gold bars as they are actually heavy because they are REAL!!!

This concludes the 22nd of Oct ResearchPaper.
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Investment / Trading Lifestyle and Healthsection:

I am introducing a section to help understandhow the brain and body work together to create an effective Investor or Traderor simply a healthy individual. Which brings me to Clarity, Clarity is important to attain. Confidence is a poor substitute for clarity. You have to be clear in your investment goals and execute without attachments and fear. How do we start by achieving Clarity? Start by stretching your back, this helps to stretch the spinal cord and should be done daily. This helps pass correct messages back and forth to your mind. Get your mind in a right place everything else ‘emotions, feelings, memory’ comes into place. This helps us to see through Market Red days and Market Green days. This helps us to see through Greed and Fear. This is what distinguishes Humans from AI Machines. The Human power of Clarity and Hope.
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I hope you enjoyed this research paper and I hope all have a great weekend and lookforward to an even more interesting next week.

Regards

OrdFinancial (MM)

Email: [email protected]