Close menu




May 16th, 2023 | 09:10 CEST

US payment default looms: PayPal, Citigroup, Globex Mining

  • Mining
  • Commodities
  • Gold
  • Lithium
  • Investments
Photo credits: pixabay.com

According to US Treasury Secretary Janet Yellen, the US could face a federal default as early as June 1. That is, if Democrats and Republicans in Congress fail to agree on a higher debt ceiling. Here we outline why the debate has come at an inopportune time, what dangers could arise for the markets and where opportunities await.

time to read: 3 minutes | Author: Nico Popp
ISIN: PAYPAL HDGS INC.DL-_0001 | US70450Y1038 , CITIGROUP INC. DL -_01 | US1729674242 , GLOBEX MINING ENTPRS INC. | CA3799005093

Table of contents:


    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG

    Full interview

     

    US facing default: Even PayPal is under pressure

    Social security, interest payments or even other government contracts: As the US government spends more than it takes in, it has to take on debt. But the debt ceiling is imminent. Without an agreement in the US Congress, there is a threat of default and, thus, a major loss of confidence. As Handelsblatt reports, Congress has raised the debt ceiling 102 times since World War II. This time, the two parties are under time pressure, and the upcoming election campaign is casting its shadow. The Republicans could try to use the debt dispute to water down parts of Joe Biden's climate legislation. If the US Democrats remain tough, a default could severely damage the US's reputation. Even lower ratings are conceivable. In the short term, interest rates could rise, and the economy could come under pressure. Handelsblatt quotes economic experts who expect the loss of up to eight million jobs in the event of a prolonged national bankruptcy in the USA. Since the US is an importer of many products and US government bonds are considered a safe haven, the distortions could be significant.

    US financial stocks in particular could suffer. The payment provider PayPal is currently trading at its lowest level since 2017. There is a risk that lower consumption in the US will weigh on business. While PayPal is well positioned in online payments and makes life difficult for the big banks, such a large market penetration can also backfire in a crisis. The share has not yet fully priced in this risk. Investors should currently refrain from catching a falling knife with PayPal.

    Citigroup: Commercial real estate as a source of danger?

    Citigroup is also not very promising. Although the Company could profit from the crisis of the US regional banks, the subsequent risks are already looming. Experts see a need for correction in commercial real estate due to higher interest rates. At Citigroup, net interest income accounts for almost 60% of turnover. Business with companies is also strong, accounting for more than 60%. If, in addition, the US defaults, the pressure on interest rates is likely to increase further and weigh even on the business of large institutions like Citigroup. So what can investors do?

    Globex Mining: Massive gold and more

    Now that the gold price has consolidated beyond the USD 2,000 mark, more and more observers see room for a dynamic breakout to the upside. If this scenario occurs, many smaller gold projects, which today are still trading at significant discounts to resources in the ground, are likely to face a revaluation. An interesting option for any form of crisis is Globex Mining. The Company is involved in more than 200 commodity projects in North America. These include precious metals as well as industrial metals and lithium. Despite the many opportunities, the share is only valued at around EUR 30 million. The share price was more than twice as high just a year ago.

    Like many other growth companies, Globex Mining has probably been punished by the market in recent months. However, as the Company has numerous other potentially scarce commodities in addition to precious metals, the business, which extends through joint ventures, profit-sharing or property sales, should tend to pick up speed. In addition, with the large number of projects, new drilling results can be announced regularly. After the share price jump in April, the price gains of that time are already gone. This could be a second chance for all investors who see prospects in the Company.


    With the banking crisis, the threat of a US default and industry transformation - the coming years could be turbulent. It is not for nothing that the gold price is currently trading near its all-time high. Many industrial metals are also desperately sought from safe sources. Therefore, Globex Mining's strategy of only including projects in North America in its portfolio could pay off. While financial stocks are under pressure for various reasons, the hour could soon come for commodity conglomerates like Globex Mining. The share appears interesting but is still a speculative investment.


    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.

    The acquisition of financial instruments involves high risks, which can lead to the total loss of the invested capital. The information published by Apaton Finance GmbH and its authors is based on careful research. Nevertheless, no liability is assumed for financial losses or a content-related guarantee for the topicality, correctness, appropriateness and completeness of the content provided here. Please also note our Terms of use.


    Der Autor

    Nico Popp

    At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.

    About the author



    Related comments:

    Commented by Fabian Lorenz on July 23rd, 2024 | 06:50 CEST

    70% with Evotec shares? Caution with BASF? Almonty Industries tempts investors to get in!

    • Mining
    • Tungsten
    • hightech
    • chemicals
    • Biotechnology

    Will BASF miss market expectations in the second half of the year? Analysts believe so. The chemical giant's revenues are already expected to fall in the second quarter. So, should one sell the shares now? The Evotec share was bought yesterday. Analysts believe that the profit warning from Sartorius should not be overestimated and see over 70% upside potential. However, patience is required. The Almonty Industries share also appears too favourable. The commissioning of a huge tungsten mine is imminent, and not only companies such as Taiwan Semiconductor and Rheinmetall need the critical metal for their high-tech products. So, when will the share break out?

    Read

    Commented by Armin Schulz on July 23rd, 2024 | 06:45 CEST

    Plug Power, Saturn Oil + Gas, RWE - Which energy belongs in the portfolio?

    • Mining
    • Oil
    • renewableenergies
    • Energy

    The debate about the ideal energy source for the future focuses on hydrogen, oil, and renewable energies. Despite its controversial reputation, oil remains a significant energy source due to its high energy density and well-established infrastructure. Technological advances are also reducing the negative environmental impact. However, renewable energies and hydrogen also offer significant advantages, such as sustainability and low emissions. However, there is a lack of infrastructure to fully exploit the advantages of these technologies. We examine one candidate from each sector and where they stand today.

    Read

    Commented by André Will-Laudien on July 22nd, 2024 | 07:00 CEST

    Despite the super disaster with CrowdStrike, 100% returns are possible with TUI, Lufthansa, Prismo Metals and BayWa!

    • Mining
    • Commodities
    • PreciousMetals
    • IT
    • Software
    • Travel

    The CrowdStrike outage shows us just how dependent the world has become on multinational corporations from America. Within hours, everything came to a standstill - nothing worked at airports, supermarkets, and banks, and some hospitals had to postpone operations. Does this make those responsible think about what urgently needs to be changed? In addition to a completely dependent situation in the IT sector, Europe, in particular, is in a pretty poor state regarding raw materials. Chancellor Scholz is looking for resources in Serbia, a country that would like to join the EU but is closer to the aggressor Vladimir Putin. Can Brussels overlook such facts and transfer billions more to Ukraine at the same time? Europe's needs are obviously manifold, and the most urgent need is likely to master the energy transition to prevent industry migration to more favourable jurisdictions. Investors are currently facing enormous challenges. We provide some ideas for a 100% portfolio.

    Read