Excess is good for the stock market

Me, You, Madness…no it’s not a story about Roaring Kitty, GameStop and Melvin, though someone has to make that into a film (Michael Lewis will be writing the novel already, I’m sure). It’s actually a 2021 film starring Louise Linton, wife of ex Treasury secretary Steve Mnuchin. I have not seen it, but I have seen the trailer. The setup sounds fun – Linton plays a psychopathic hedge fund boss. But while it contains just everything you can cram into a feature film; it looks exceptionally bad. So bad it’s actually good. Maybe. How it ranks in the canon remains to be seen. It’s really a vanity project, which is really a form of excess that we see in lots of corners of the market right now – think Tesla, the meme stocks, Bitcoin (just don’t include the FTSE…).

Biden’s $1.9tn stimulus package is probably excessive. t’s certainly full of waste, full of ways to prop up failing businesses and deliver helicopter money to a lot of people who don’t really need it. The economy is rebounding anyway. Jobs are coming back. A lot of the money will find its way into things like paintings, cars or fine wine. It will also find its way into stocks, or crypto-assets, or even non-fungible tokens (NFTs).

It will also find its way into paying down debt, and this is huge. The US government is embarking on a massive debt transfer from households to government. It can unleash huge potential by transferring the burden from productive capital (private) to unproductive (public) and is potentially one of the most explosive forces in capital markets in several generations. This transfer of debt will unleash entrepreneurial spirits that would otherwise be restricted. I fail to see how it do anything but increase asset prices, including stocks – despite the rise in yields. It allows households to take on more debt, start businesses and buy more stuff. It also lets them invest in stocks directly. The craziest thing is that it won’t help inequality- poor folks need the money for bills, food etc. Middle class folks will put the money to work. Those without big outgoings will reduce debt so they take on more risk in future because they’re not saddled with big debt obligations like student loans. We’re going to be hit by a massive surge in growth and bond yields will spiral. Inflation will spike and unless the fed gets a grip, it will lose control of inflation. I feel like we’re at the start of a massive economic boom, at least in the US, where policy makers have been vastly more ambitious than they have elsewhere.  I might be over-egging the pudding, but I sense people don’t appreciate just how important this debt transfer is going to be for the structure of markets and the economy.

Inflation is dead. Inflation is temporary… 

Year-on-year comps will start to show inflation rising. The NY Fed’s Empire State Manufacturing Survey yesterday contained something interesting in its inflation component: „Input price increases continued to pick up, rising at the fastest pace in nearly a decade and selling prices increased significantly.“ Other datasets have shown input prices starting to inflate at the fastest pace in years.

Yesterday I touched on the way [some] central banks seemed kind of unconcerned by the rise in yields – last time he spoke Powell didn’t take the opportunity to push back against the rise in yields (no hint of a Twist), and the BoE’s Bailey said yields are rising because of growth. And now we have the RBA – the first to blink by stepping up asset purchases to counter the rise in bond yields – saying in the minutes to its last meeting that the gyrations in bonds are not that significant. And now the ECB – after another communication failure by Christine Lagarde – says yield curve control is unnecessary. ECB chief economist Philip Lane pointed out to the FT that the is not like the last crisis with years of lost output. Which means CBs don’t need to worry about taming yields in the same way.

The mantra seems to be that inflation – previously thought dead – will only be temporary and yields are just moving up because economic activity will hit 2019 levels this year. It’s just not that simple: yields reflect the fact that there is a lot more cash sloshing around – US bank reserves have doubled to about $3.4tn since the start of the pandemic. More stimulus, more growth, more money in the system, more debt issuance – yields are marching higher for number of reasons but mainly reflect growth expectations, inflation expectations and issuance – both real and expected. The extent each exerts a pull on yields (and the extent to which each is affecting the other) is obviously up for a lot of debate and a lot harder to measure. But what seems clear to me is that yields are facing a lot of upwards pressure. Then we have market functioning elements like extending SLR – failure to extend could see a heap of Treasuries come onto the market, making things more volatile.

But I think the big question that we are yet to really answer is how much markets are worrying about debt. I’ve banged on a lot about MMT before – deficits don’t matter and all that – not with any real view on what we should be doing, but rather with an interest in the debate about how we approach fiscal and monetary policy. If markets really are worried about the debt and their ability to absorb all this issuance, then it probably does have some important long-term implications, such as whether you can keep running perpetual deficits, can you always just increase the debt ceiling, and should you look to balance the books? How quickly do you suck the money back out of the system? And with the Democrats gaining those Senate seats in Georgia there is a lot more stimulus coming over the hill.

The back up in long end real rates took off on January 5th – after the Georgia runoffs – indicating people think issuance is a factor.

The back up in long end real rates took off on January 5th.

Inflation expectations are at multi-year highs.

Inflation expectations are at multi-year highs

Stocks in Europe took the cue from a positive session on Wall Street, with the main bourses mounting a fresh stab higher after yesterday’s early promise somewhat fizzled out in the latter part of the session. Positive Zalando and VW updates provided comfort to the Stoxx 600, whilst the DAX rose 0.6% in early trade. The FTSE 100 trades higher with a fresh attempt to clear the big resistance around 6,800 – near-term trend support is about to run into this level so a big test lies ahead with a possible leg up should 6,800 finally be taken out with conviction. Overall the mood in Europe was probably constrained yesterday by several countries halting the AstraZeneca vaccine, but this should prove a major constraint for the market.

The FTSE 100 trades higher.

Did you doubt that the arrival of ‘stimmy’ cheques would do anything other lift stocks? Yields didn’t really do anything so there wasn’t that immediate stress for the growth end of the market. Investors are looking at the yields and probably thinking yes it means multiple compression, but then you have to look at the $1.9tn coming over the hill at a moment of a strong cyclical recovery as fresh juice. US 10-year notes hovered around 1.6%. The Nasdaq 100 ended up 1% and the best of the induces after a big rally into the close. The Dow Jones rose 0.5% to a fresh record high as it notched its 7th straight daily gain. The S&P 500 also made a fresh ATH after rising 0.65% – its 5th straight day of gains. Futures point to another higher open.

Tesla rose 2% despite the company saying that Elon Musk’s title was changing to Technoking of Tesla, whilst CFO Zach Kirkhorn would henceforth be known as ‘Master of Coin’. GameStop sank almost 17%, AMC Entertainment rose 25% as it embarks on reopening cinemas. Keep your eye on these meme stocks as stimulus cheques could do a lot of work for them.

Yields remain the big threat to daily gains – if you see Treasury yields pop it will rock the market, but longer-term stocks can handle higher rates and unless there is another exogenous shock or a meltdown in funding markets like we saw with the repo stress a couple of years ago [watch that SLR decision], the path of least resistance is up. The Fed meeting this week is the clear risk event for yields but today we also have US retail sales to watch.

Sterling retreated to a one-week low vs the dollar. GBPUSD declined to around 1.3830 and may seek a test of the 50day SMA. The yield on 10-year gilts spiked to 0.86%, the highest in a year, but has this morning retreated back under 0.8%.

Sterling retreated to a one-week low vs the dollar.

Bitcoin trades higher this morning with the 200-hour SMA offering the support. MACD bullish crossover seen.

Bitcoin trades higher this morning.

Wochenausblick: EZB spricht, US-Verbraucherpreisindex und BoC-Stellungnahme

Wir haben eine volle Woche für die europäische Wirtschaft vor uns, mit der Pressekonferenz der EZB und Aussagen zum Zins. Kommen Änderungen der Wirtschaftspolitik, um die steigenden Rendite aufzuhalten? In den USA werden die Zahlen des Verbraucherpreisindex’ veröffentlicht. Sie werden einen Einblick in die Wirkung der Inflation geben. Die Bank of Canada wird auch ihre Tagesgeldsatzerklärung abgeben, und ein starker wirtschaftlicher Ausblick für Kanada könnte eine Änderung der Anleihekaufpolitik bedeuten.

Wird die EZB ihr Anleihenkaufprogramm anpassen, um die steigenden Renditen anzugehen?

Die Anleiherenditen haben in den letzten Wochen viele geldpolitische Gespräche geprägt, und wir werden in der dieswöchigen Erklärung und Pressekonferenz der EZB auf die Reaktion der Europäischen Zentralbank auf steilere Kurven achten.

Wir haben bereits gesehen, dass Vorstandsmitglied Fabio Panetta sich dafür einsetzt, weiterhin Anleihen zu kaufen und die finanzielle Unterstützung aufrechtzuerhalten, während die Pandemie anhält.

„Der Anstieg der mit dem nominalen BIP gewichteten Renditekurve, den wir jetzt sehen, ist nicht willkommen und muss widerstanden werden. Wir sollten nicht zögern das Einkaufsvolumen zu erhöhen und das Pandemic emergency purchase programme (PEPP) in vollem Umfang oder wenn nötig auch darüber hinaus auszunutzen,“ sagte Panetta am Dienstag, den 2. März.

„Die Unterstützung der Politik wird dafür weit über das Ende der Pandemie hinaus erforderlich bleiben,“ fügte er hinzu. „Die Risiken zu geringer Stützung überwiegen die Risiken von zu geringer Stützung bei weitem. Mit dem längeren Niedrighalten der nominalen Rendite können wir einen starken Anker bieten, um versorgende Finanzierungskonditionen zu erhalten.“

Trotz dessen haben wir eine Verlangsamung des Anleihenkaufprogramms der EZB am Montag den 1. März gesehen. Zu dem Zeitpunkt hatte die Bank 12 Milliarde Euro in Anleihenkäufen getätigt, gegenüber 17,5 Milliarden Euro in der Vorwoche. Der Rückgang ist auf viel höhere Rücknahmen zurückzuführen, berichtet Bloomberg. Vielleicht ein Zeichen für eine anstehende Politikanpassung?

Das könnte den Wünschen Panettas zuwiderlaufen: „Wir müssen die Glaubwürdigkeit unserer Strategie festigen, indem wir demonstrieren, dass eine unangemessenes Anziehen nicht toleriert wird.“

„Wir haben Möglichkeiten darauf zu reagieren,“ sagte Jens Weidmann, Chef der deutschen Bundesbank, CNBC. „Das PEPP kommt mit einer gewissen Flexibilität und diese Flexibilität können wir nutzen, um auf eine solche Situation zu reagieren.“

Das Notfall-Anleihenkaufprogramm der EU wird bisher bis März 2022 weiter fortgeführt, mit einem Gesamtvolumen von 1,85 Billionen Euro. Weidmann gab an, dass die EZB die Einkäufe im Kontext steigender Renditen wieder ankurbeln könnte.

„Das ist ein Element, das auf dem Tisch ist, die Flexibilität, die wir in der Umsetzung des PEPP zu nutzen,“ sagte Weidmann. „Aber nochmals, der erste Schritt ist die Analyse der zugrundeliegenden Ursachen und die Einschätzung, welche Wirkung wir auf unser schlussendliches Ziel haben, der Preisstabilität.“

Die Renditen und die Reaktion der EZB werden bei der nächsten Ankündigung am 11. März im Mittelpunkt stehen.

US-Verbraucherpreisindex, Renditen und Inflation

Wir werden mit der Veröffentlichung des Verbraucherpreisindex-Reports des US-Arbeitsministeriums weiter sehen, ob die Inflation in den USA wirklich Zähne zeigt.

Steigende Renditen von US-Anleihen sind quasi schon seit einigen Wochen Gesprächsmittelpunkt, da sie die globale Finanzwelt beeinflussen. Die Renditen der 10-jährigen US-Schatzanweisung überschritten am 17. Februar 1,3% und sind seitdem auf fast 1,6% gestiegen.

Renditen neigen dazu, zusammen mit Inflationserwartungen zu steigen, da Anleihen-Anleger weniger auf Anlagen mit niedrigen oder negativen Renditen aus sind. Höhere Renditen könnten außerdem mehr Schuldendienste für große Firmen bedeuten. Das wirkt sich negativ auf die Aktienmärkte aus, da Händler die Investitionsumgebung neu einschätzen.

Davor zeigte der Verbraucherpreisindex für Januar eine Schrumpfung, bei der die Inflation auf 0,3% zurückging. Im Vergleich zum Vorjahr blieb der VPI konstant bei 1,4%. Der Kern-Verbraucherpreisindex, der volatile Lebensmittel- und Energiepreise ausschließt, sank auf 1,4% im Januar von 1,6% im Dezember und sank damit tiefer, als die vom Markt erwarteten 1,5%.

Der Preisdruck war vermutlich im Februar stärker.

Die höhere Rendite und die Inflationsrate werden im Kontext weiterer Konjunkturpakete im Fokus bleiben. Das 1,9-Billionen-Dollar-Paket von Joe Biden wird sehr wahrscheinlich bald verabschiedet, was hoffentlich zu mehr Ausgaben und Konsum in der gesamten US-Wirtschaft führen wird. Mit mehr einfach erhältlichem Bargeld, könnte die Inflation weiter steigen.

Es gibt einiges aus den US-VPI-Veröffentlichungen dieses Monats herauszulesen.

BoC Zinsbekanntgabe – keine großen Änderungen erwartet

Die Bank of Canada wird diese Woche ihre jüngste Zinspolitik bestimmen. Könnte wir eine Zurücknahme der wirtschaftliche Stützung erleben? Vorläufige Berichte zum BIP suggerieren, dass der Ausblick für die kanadische Wirtschaft relativ gesund ist, sodass eine Zurücknahme der Anleihenrückkäufe am Horizont stehen könnte.

In einer Pressemitteilung vom Januar erklärte die kanadische Zentralbank, sie werde den aktuellen Leitzins halten, bis das Inflationsziel erreicht ist, während sie ihr quantitatives Lockerungsprogramm fortsetzt und jede Woche Anleihen im Wert von 4 Milliarden CAD kauft.

Allerdings zeigen die jüngsten kanadischen BIP-Zahlen eine widerstandsfähige Wirtschaft. Die kanadische Wirtschaft wuchs auf das Jahr gerechnet im vierten Quartal um 9,6%, wie Zahlen von Statistics Canada am Dienstag den 2. März zeigten, was über den von Analysten erwarteten 7,5% lag.

Zinssätze werden wahrscheinlich bis 2023 um die Null bleiben. Die Hypothekenzinsen haben sich jedoch aufgrund der steileren Renditekurven allmählich erhöht, aber der Leitzins wird noch einige Jahre lang niedrig bleiben, sagt BoC-Gouverneur Tiff Macklem.

Obwohl einige Beobachter der Ansicht sind, dass die stärkeren wirtschaftlichen Aussichten möglicherweise auf eine Kürzung der Anleihekäufe hindeuten, hat die BoC den Kauf von Provinzanleihen im Rahmen einer Gesamtstrategie beschleunigt, um steigenden Renditen entgegenzuwirken und den Provinzen mehr Liquidität zur Verfügung zu stellen, um ihre Wirtschaft in Zeiten der anhaltenden Covid-19-Pandemie zu stärken.

Die Zentralbank kaufte letzte Woche Anleihen im Wert von 436,5 Millionen CAD über das Provincial Bond Purchase Program – der größte Kauf seit Beginn der Anstrengungen im Mai.

Wie alle Volkswirtschaften, ist es allerdings unwahrscheinlich, dass Kanada weltbewegende Änderung während der am 10. März erwarteten Zinsentscheidung macht.


Top Wirtschafts-Daten der Woche

Date  Time (GMT  Currency  Event 
Wed 10 Mar  1.30pm  USD  CPI m/m 
  1.30pm  USD  Core CPI m/m 
  3.00pm  CAD  BoC Rate Statement 
  3.30pm  CAD  Overnight Rate 
  3.30pm  USD  US Crude Oil Inventories 
Thu 11 Mar  12.45pm  EUR  Main Refinancing Rate 
  12.45pm  EUR  Monetary Policy Statement 
  1.30pm  EUR  ECB Press Conference 
Fri 12 Mar  1.30pm  CAD  Employment Change 
  1.30pm  CAD  Unemployment Rate 


Top Geschäftsberichte diese Woche

Date  Company  Event 
Tue 09 Mar  Deutsche Post  Q4 2020 Earnings 
  Continental  Q4 2020 Earnings 
Wed 10 Mar  Oracle  Q3 2021 Earnings 
  Adidas  Q4 2020 Earnings 
  LUKOIL  Q4 2020 Earnings 
  Legal & General  Q4 2020 Earnings 
  Campbell Soup  Q2 2021 Earnings 
  Prada  Q4 2020 Earnings 
Thur 11 Mar  Rolls Royce  Q4 2020 Earnings 

Powell worries markets, stocks decline as yields rise

You could call it a failure of communication. No hints of a Twist mark III, no worries about funding markets. Yields surged and the selloff in tech stocks gathered steam, dragging the whole market down as Fed chair Jay Powell refrained from jawboning yields or coming anywhere near close to signalling the central bank would attempt to lean on the yield curve. Powell is letting the market be a market – hallelujah you may say. Let the market fend for itself. Far from hinting at a third iteration of Operation Twist, he stressed confidence in the current pace of policy. 


Powell said the Fed would need to see a broader increase across the rate spectrum before considering any action and stressed that the current policy stance is appropriate. He didn’t signal the Fed was in any rush to do anything about the rising yields. The truth is the Fed is still super-accommodative, but the bond market is testing its mettle.  The closest hint of concern was this: “We monitor a broad range of financial conditions and we think that we are a long way from our goals,” Powell said, adding: “I would be concerned by disorderly conditions in markets or persistent tightening in financial conditions that threatens the achievement of our goals.” 


The more dovish he sounds the more long-term rates go up. When there is no inflation, he can remain dovish and have no effect on the long end – but when the market thinks there is going to be inflation, he has no control, and the bond market will do the tightening for them. The Fed is left in an invidious position and now must play catch up to reconverge with the market. So, does that mean we get a more hawkish Fed – or less dovish perhaps? It seems unlikely and would go against everything the Fed has said so far. A third Twist may be a way out, but it will only kick the can down the road a little further. 


I said yesterday Powell’s speech could be make or break time and so it transpired. The dollar ripped higher, stocks, metals and rates sold off. A lot of stocks in the tech space got a bloody nose, and a lot of investors did too, Cathie Wood among them. ARKK and Tesla both declined 5%.; the latter is down 30% from its highs. Apple declined 1.58% and is about 15% off its highs; the difference between real and illusory earnings starkly obvious within the ‘tech’ space. GameStop closed up 6% after it spiked on no news – flight to quality perhaps? (ho ho ho).


The Nasdaq 100 declined 1.73% and closed under 100-day simple moving average, but off its lows. The tech losses bled across – the S&P 500 fell 1.3% and the Dow was also down a little over 1% as energy and financials were less impacted. The US 10-year Treasury yield rose close to 1.59%. European stocks have tracked lower this morning, mirroring the move on Wall Street and a soft session in Asia. Nevertheless, European stocks were set to close the week out higher – less tech means less trouble right now – as the S&P 500 looks poised to end the week about 1% lower. And whilst down around 1% today, the FTSE 100 is set for a +1% gain for the week.


This is the kind of market that will trap bulls and bears alike. It was looking pretty solid in the early part of the US session before Powell spoke. Whilst it’s showing signs of a strong pullback, there are still dip-buyers out there. Moreover, this is about a re-rating to the rise in yields and not because the economic prospects are worse. A little froth is coming out of the market and that is no bad thing. The VIX is not really reacting in the way we might expect to this volatility, which indicates ‘fear’ is not high. If the S&P 500 drops under 3,750 at the close today, we may be looking to further downside. Otherwise, it’s maybe just a short-term capitulation on rising yields and we rally back.


Yield differentials took the dollar higher. GBPUSD this morning trades around 1.3850, its weakest since the middle of February. EURUSD is back under 1.20. Copper and zinc fell sharply as they retreat from multi-year highs – probably more speculative froth coming off the top than any warning signs for the economy. Gold sank as real yields rose firmly and is now testing the next Fib level around $1,690. NFP day today 

Gold sank as real yields rose firmly.



What does Joe Biden do? Should the US president by calling the Saudis to stop this rally, or is he happy to watch the cartel raise oil prices? A question for the president’s resolve perhaps, but for now we can safely say the market was caught off guard as OPEC didn’t elect to increase production next months. 


Oil prices surged to their highest since January 2020 after OPEC and allies chose to roll over production cuts for another month. The 23-nation OPEC+ agreed not to raise output by 500k bpd in April as had been expected. Saudi Arabia also elected to maintain its additional voluntary 1m bpd production cut. Whilst Russia had been pushing for production to increase, it seems Saudi Arabia kept a grip on the cartel. Russia will be allowed to raise production by 130k bpd next month as compensation for lost output due to cold weather in Siberia. Kazakhstan will be allowed to increase production by 20k bpd. 


OPEC+ reached a compromise that is bullish for prices, but this is likely to create more pressure on Saudi Arabia to let countries open the spigots when the cartel next meets in April to decide on output for May. Moreover, the market was already sharply tightening ahead of the meeting. It could be time for $70 crude oil again before long. 

Stocks rally as yields retreat, UK housebuilders jump

Last week stocks came under pressure from rising bond yields, as a rates selloff that has been bubbling under the surface since last November gathered steam. US 10-year rates jumped above 1.6% at one stage, their highest in a year, hitting stocks that have been used to ultra-low rates. The FTSE 100 recorded its biggest single day fall since October. By the weekend there had been some paring of losses in the US with the Nasdaq rising on Friday even as the broad S&P 500 declined again, and the 10-year benchmark returned to the 1.4% handle. In his annual letter to investors, Warren Buffet warned that fixed income investors face a “bleak future” as “bonds are not the place to be these days”. 


The Fed has signalled it’s comfortable with what’s going on, which only makes it more likely that the bond market is going to test its resolve. However the Reserve Bank of Australia is already stepping in and on Monday said it will buy more than $3 billion of longer-dated bonds, after announcing a surprise boost to purchases of three-year paper last week. Yields declined sharply, with the 10-year note declining from almost 1.9% to a low of 1.6%, as the central bank said it would double bond purchases as part of a regular operation. The RBA move helped to keep rates calm on Monday but you start to wonder if the genie is out of the bottle now.


Stock markets in Europe opened a lot firmer on Monday partly as a reaction to Friday’s big fall, partly with ‘vaccine optimism’ again a factor as the US regulators approved the Johnson & Johnson single-shot vaccine. The House of Representatives passed Biden’s $1.9 trillion stimulus package over the weekend, and the bill now heads to the Senate for debate. Democrats have the slimmest of majorities, and attention will focus on the likes of Joe Manchin, the West Virgina Senator who has become the kingmaker as far as Democrats are concerned. He has previously opposed direct payments, but since suggested he would be willing to back them so long as they are targeted at those in need. A generous fiscal package will almost certainly be passed, nevertheless. 


Shares in housebuilders rose strongly to the top of the FTSE 100 on reports the chancellor is set to unveil fresh support for first-time buyers. A mortgage guarantee scheme will be launched, bringing back 95% deals. This will underpin confidence in the housing market, which is inextricably linked to confidence in the broader economy. It should also be a big boon for the housebuilders. Taylor Wimpey, Barratt Developments, Berkeley Group and Persimmon all climbed around 4-6% in early trade on Monday. IAG rallied over 4% as hopes grow of a speedier reopening of international travel. 


In FX, the crash in the Australian dollar has eased with AUDUSD bouncing off the 0.77 region. Still, it’s down 3% or so in the last couple of sessions. Sterling was a little firmer but remains under $1.40 after the exhaustion gap last week. The latest CFTC report shows aggressive long positioning in sterling, with net long GBP rising to 31k in the week to Feb 23rd from 22.2k in the prior week. 


Oil remains supported ahead of this week’s OPEC+ meeting. Sources indicate the cartel will increase output by 1.6m bpd from April as pressures mounts to open the spigots as prices have recovered. Bitcoin was steady around $47,000. Gold bounced after touching its weakest since last June on Friday. Prices advanced to $1,760 after dipping to $1,717 following the breach of the Nov 30th support at $1,763.  

Gold bounced after touching its weakest since last June on Friday.

Markets sell off on bond rout + Coinbase IPO

IPO filings used to be less interesting. It’s been rather fun to record how some (not so fast-growing, it turns out) tech unicorns have explained their businesses (it’s about people), the risks to growth (we have never made a profit and may never do so), and how they plan to structure voting rights (you don’t get any). So imagine just how much fun various analysts and reporters have had poring over the S-1 filing from Coinbase, the crypto exchange which is about to list on the Nasdaq.  


It’s fair to say the listing document is not short on eyebrow-raising information. We have for instance a Borrow & Lend scheme that lets US retail customers borrow against and lend their crypto asset portfolios. “Our first product is a portfolio-backed loan: a flexible, non-purpose 12-month term loan that allows retail users to borrow US dollars using their crypto assets as collateral. Secured by their investment portfolio, customers can use the line of credit to access U.S. dollars while maintaining a “hodl” investing strategy. Over time, we plan to offer our retail users the ability to opt into lending their crypto assets to earn a passive return on their long term investments,” the statement explains. Now this is where it gets really interesting from an institutional point of view as you can harvest yield on crypto assets as a basis trade. The filing also shows that Coinbase earns interest on customer deposits.


The company has no address – nowhere to forward strongly-worded letters when the coins are lost or hacked – for Coinbase is a “remote-first company”. Nice touch for the new normal, post-pandemic work from home world. Less good if you are say, an underwriter for the listing. Maybe one reason why it’s gone the direct route. There are several legal proceedings on the go, including a CFTC investigation commenced in July 2017 that has covered topics including a 2017 Ethereum market event, trades made in 2017 by one of Coinbase’s then-current employees, the listing of Bitcoin Cash on its platform, and the design and operation of certain algorithmic functions related to liquidity management on the platform. “During the course of its investigation, the CFTC has issued subpoenas to us and certain of our directors, executive officers, and former employees, including testimony subpoenas, and other requests for information. We are cooperating fully with the investigation,” Coinbase explains.  


Then you have the various risks, one of which is the CEO taking his eye off the ball with other ‘cryptoeconomy’ projects. George Osborne would approve. In a nice little dig at the established financial system (Coinbase let’s not forget sees itself as being at the vanguard of creating an ‘open financial system’), it even called out the Federal Reserve as a potential risk to its business, citing the 2-hour outage to the central bank’s payment network this week. Trolling the Fed will appeal to its customers – who will of course want to be shareholders.


Hacks – customers losing all their Bitcoins – are in there, naturellement. But they are not so high up as the volatility of crypto prices. In fact earnings are inextricably tied to crypto prices, the filing makes plain. This is not the case with listed exchanges trading equities. The price of Unilever shares doesn’t really matter to the LSE. This link to pricing, rather than just volume, may be obvious in this case since prices and volumes are correlated in cryptos, but it interesting to see in black and white: “Our total revenue is substantially dependent on the prices of crypto assets and volume of transactions conducted on our platform. If such price or volume declines, our business, operating results, and financial condition would be adversely affected.” 


More than anything it’s highly dependent on Bitcoin. A majority of Coinbase’s net revenue is from transactions in just two crypto assets: Bitcoin and Ethereum. For year ended December 31, 2020, Bitcoin, Ethereum, and other crypto assets represented 70%, 13%, and 13% of assets on platform respectively. “If demand for these crypto assets declines and is not replaced by new demand for crypto assets, our business, operating results, and financial condition could be adversely affected” says the filing. 


Institutional interest is rising. Whilst we know this is the direction of travel – we have seen Square, Tesla and MicroStrategy invest in Bitcoin and the likes of PayPal and Mastercard announce plans to support crypto payments, the filing further underscores growing institutional interest. “More recently, we have experienced significant growth in the number of institutions on our platform, increasing from over 1,000 as of December 31, 2017 to 7,000 as of December 31, 2020,” the filing says. 


Finally – what’s the scoop on its outlook? Let’s not stress about valuations for now. I’d say the margins look handsome with revenues of more than $1.1bn from $193bn in transaction volumes, which puts in a nice place to take advantage of soaring interest in cryptocurrencies. A listing gives it Wall Street status in a world that is only starting to see the first railroads and barbed wire fences erected. And despite any investigation (or rather, let’s park those for now as we don’t know enough about their material impact and I can’t believe they are anything scarier than other exchanges), a Nasdaq listing will make Coinbase appear like its sheets are the cleanest. It also has 46m users, many of whom will want to own stock.

Stocks slide as bond yields surge

Stock markets are in retreat as bond yields advance. Yields are rising across the globe, prompting investors to ditch stocks, especially richly valued growth names. The tech-heavy Nasdaq fell 3.5%, with the broader S&P 500 down 2.5%. Tesla declined another 8%, while Apple and Amazon tracked about 3% lower. Asian markets sold off by the most in 11 months with shares in Tokyo down 4%, while the Hong Kong market dipped over 3.5%. European stocks followed suit with broad-based selling in early trade on Friday, but early losses of more than 1% were pared as the buy-the-dip mentality lives on. The FTSE 100 should be more insulated to rising rates since it’s a) nowhere near all-time highs and b) is well exposed to global cyclical growth. 


The yield on the 10-year US Treasury note briefly spiked above 1.6% for the first time in over a year yesterday, as markets bet on higher inflation, before retreating back under 1.5%. This despite Fed speakers offering soothing words about inflation to the market this week. You could argue there is a communication problem, or you could simply call it tantrum. Actually, it’s a global phenomenon as investors across the world sell rates in the expectation of a strong economic rebound and higher inflation. Markets are now starting to price for rate hikes far sooner than the Fed is indicating it will act. It’s not that rates are particularly high, it’s more the pace of the move taking frothy equity markets off guard. Valuations are stretched, so richly valued stocks are easily moved by these kinds of gyrations in the bond market. Whilst investors had been reasonably comfortable with a rising tide for rates, this sudden lurch higher requires repricing. Gold broke down at the key Nov low at $1763 as real rates continue to climb. Three days after the 30-year TIPS yield turned positive, the 20-year is close to flipping positive too. 


The dollar has risen as yields go up and stocks sold off. The risk-on pound fell amid the risk-off mood. GBPUSD, which had maybe exhausted itself, has retreated back under 1.40 after running out of steam at 1.42, the 3-year high. EURGBP rallied back above 0.87, having tested 0.8540 on Wednesday. 


Airbnb earnings held up better than expected and much better than peers. Q4 revenues declined 22% to $859m. Expedia reported a drop in revenues of 67% over the same period. Losses for Airbnb swelled to $3.9bn, with management saying this was impacted by charges related to IPO, including and included $2.8bn of stock-based compensation expenses. 

GameStop Reddit redux, vaccines & Powell deliver hope as equities shrug off higher yields

Who doesn’t like a McFlurry? McDonald’s ice cream may seem like an unlikely trigger for a fresh bout of frenzied retail trading, but there’s still something odd going on with GameStop shares. And it has something to do with ice cream. Shares in the company doubled yesterday – not so amazing you might think given the recent volatility, but the pop came entirely in the final hour and a half of trading amid heavy volume. Trading in GME was halted twice and the move spread to other names that were part of the recent Reddit frenzy. AMC Entertainment rose 18% on exceptionally high volumes. GME shares rose another 83% in after-hours trade to $168, having started the session at $44.70.

Figuring out why all this occurred late in yesterday’s US session is harder to explain than the short squeeze of January. Heavy buying of bullish call options may have exaggerated the move, but didn’t cause it. The CFO’s departure – which is part of the shake-up that investors are hoping for – was known before the opening bell, so shares would have responded before 7pm GMT. It could, though, be related to a tweet from activist investor Ryan Cohen, who posted a picture of a McDonald’s ice cream just before 7pm, a couple of hours before the US cash equity close. Does it signal Cohen, the founder of Chewy.com and leading investor in GameStop, will fix the company the way McDonald’s finally fixed its ice cream machines? (For those who have never set foot in a McDonald’s, the ice cream machines are broken so frequently it has become a meme on Twitter.) Or could it be even more cryptic and related to a new website that tells you in real time whether your local McDonald’s has a functioning ice cream machine?  Who knows, stranger things have happened. It looks like the Reddit crowd are at it again.


GameStop shares have doubled again.


Yields continued to advance, with US 10 year Treasuries north of 1.4% at a fresh year high, whilst Japanese bond yields rose to their highest in over two years. This failed to worry the market, however, as Fed chair Jay Powell administered more soothing words on inflation. The Dow Jones rallied 1.35% to a record high, briefly touching on 32,000 and closing within 40pts of this marker. The S&P 500 rose over 1%, the Nasdaq recovered 1% and the Russell 2000 of small caps rose by more than 2.3%. European stocks rose tamely in early trade on Thursday. Gains for the FTSE 100 were capped by 13.4pts inn ex-divis but it nevertheless pushed on to almost 6,700. Gold retreated under $1,800, whilst Bitcoin was steady at $50k.

Vaccine progress is underpinning strength in cyclical names, with the Johnson & Johnson covid jab set to get the green light in the US after the FDA staff report said there are no safety concerns with the single-dose vaccine. Energy and Financials are at the top of the Stoxx 600 in Europe this morning. Bond proxies, tech and growth all remain more problematic as yields go higher.

Charlie Munger, long-time friend and partner of Warren Buffett at Berkshire Hathaway has lashed out at Bitcoin, Tesla, Robinhood and SPACs. Sounds like my kind of guy. Asked whether he thought Bitcoin at $50k or Tesla being valued at $1tn was the crazier, he said: “Well I have the same difficulty that Samuel Johnson once had when he got a similar question, he said, ‘I can’t decide the order of precedency between a flea and a louse,’ and I feel the same way about those choices. I don’t know which is worse.” There were some other great nuggets such as: “Bitcoin reminds me of what Oscar Wilde said about fox hunting. He said it was the pursuit of the uneatable by the unspeakable.” To which Bitcoin HODLers would no doubt respond by saying ‘have fun being poor’. Still Munger doesn’t invest in gold, so why would he invest in Bitcoin, since it is clearly not a currency? He also warned about blank cheque special purpose acquisition companies – or SPACs – saying they represent “crazy speculation in enterprises not even found or picked out yet” which is “a sign of an irritating bubble”.

Elsewhere, oil prices rose to their highest in over a year despite a surprise build in US crude inventories as the freezing weather in Texas shut refineries. Stockpiles increased by 1.3m barrels, vs expectations for a draw of more than 5m barrels. Stocks at Cushing, Oklahoma, rose for the first time in six weeks as refiners couldn’t take delivery. Bulls were buoyed, however, as US weekly crude output fell by 1.1m bpd, equally the biggest drop on record. The big freeze in Texas has really thrown the weekly numbers out of whack, but it’s clear demand is picking up. Everyone is now looking at the OPEC meeting next week on March 4th and an expected easing of self-imposed supply constraints.

In FX, sterling is trying to mount a fresh challenge at $1.42 after yesterday’s reversal. This looks more like a pause on the way to the $1.45 area for GBPUSD. Turning to Bank of America comments on sterling, which says the “backdrop could not be more conducive to further GBP gains as UK steadily re-emerges from lockdown and vax rollout remains exemplary. BoE discussion on neg rates is likely to be delayed into Q3, whilst GBP should benefit from structural seasonality in April“. That sounds bullish.

Bitcoin hits fresh record high, stocks sell off early

Are things like inflation and rising bond yields really a concern for the market? Commodity prices keep surging, inflationary pressures are evident and the vast increase in money supply provides the ammunition. Average inflation targeting by the Fed provides the necessary context. PMIs last Friday pointed to higher inflation coming through. Substantial price increases for inputs such as PPE led to the fastest rise in “cost burdens” since October 2009, when the index started. Moreover, strong demand allowed firms to pass on the cost increase by raising selling prices. The rate of inflation in what firms charge customers was the second-fastest on record (behind only November 2020). In the UK, the composite PMI showed that “cost pressures intensified across the UK private sector during February”. Yields on government bonds continue to march higher. US 10-year Treasuries trade close to 1.4%, a year high. The spread between 2s and 10s is at its widest in four years at 1.28%, whilst the 5s30s spread is at a 7-year high at 1.57%. UK gilt yields are at year highs above 70bps and 2s are at their highest since April suggest the market doesn’t think the Bank of England will go for negative rates. 


If the Fed is worried about inflation and rising yields, this week’s round of speeches provides the ideal time to push back. I don’t expect they will – the Fed explicitly wants the economy to run as hot as it can to get employment back to 2019 levels. But that’s why inflation expectations can become unanchored. Powell delivers his semi-annual testimony to Congress this week, whilst Richard Clarida has two speeches on the economy and monetary policy. Lael Brainard and Michelle Bowman are also slated to speak this week. I think the Fed speakers will stress both transience of inflation hikes and that policymakers are comfortable with above 2% prints (AIT implies this anyway). We know where policymakers sit on this. Treasury Sec Yellen last week said the price of doing too little is “much higher” than doing too much. Anchors are being slipped.


European markets sold off early on Monday, with the major bourses falling around 1%. Inflation and yield concerns may be the driver but the move seems a little overcooked. Investors are starting to show their worry about yields – TINA is no more. The question is more of allocation and small caps vs large caps. Oil trades a couple of bucks off its recent year high, gold has made a decent fist of a rally off the key support at $1,763 to reclaim $1,790, whilst the dollar rose in early trade and GBPUSD was just a little under $1.40. Copper prices slipped but remain above $4 and fundamentals continue to support with a sharp deficit seen this year. 


UK prime minister Boris Johnson will set out the road out of lockdown tonight – except most of it has already been leaked to the press so we know the major steps. Schools first, pubs last. Perhaps that is fair, but we can argue the caution will make for a slower recovery this year than it might be.


Bitcoin hit a fresh record on Friday with its ‘market cap’ [total coins in circulation x price] exceeding $1tn for the first time. Prices gapped higher over the weekend towards $58k but has since pared gains to trade around $56k this morning. Elon Musk said prices seemed ‘too high’. Wags will note that Musk tweeted “Tesla stock price is too high imo” in May 2020 – and we know what happened to the shares since then. His decision to invest $1.5bn in Bitcoin has provided the keystone for near-term constructive view on Bitcoin, building on the gains made since the PayPal move last year.  


It’s been a heady few weeks as we have seen a slew of corporate and institutional support feed through into higher prices. In addition to Tesla, BlackRock has “started to dabble [in Bitcoin]”, long-time gold bull Jeffrey Gundlach of DoubleLine Capital is backing Bitcoin as the asset to insulate investors against the great monetary inflation, Microstrategy is issuing $600 million of senior convertible notes in order to buy more Bitcoin, BNY Mellon became the first big national custodial bank to offer custody services for crypto assets, and Mastercard said it will start supporting some cryptos this year.  


It should go without saying that new investors to Bitcoin should be prepared for a major volatility and for prices to drop suddenly and as sharply as they have risen. We’ve already seen a 30% drawdown in Bitcoin this year from the Jan 8th peak to Jan 21st low. If we see another 30% pullback from these levels we are looking at $40k again. Tesla has made about $1bn so far on its investment, according to Wedbush.

Bitcoin prices are rallying once more.

Wochenausblick: US-Verbrauchervertrauen wackelt, während steigende Renditen die Märkte beeinflussen

Im Ausblick für die nächste Woche sehen wir das US-Verbrauchervertrauen auf wackeligen Beinen, trotz anstehender Konjunkturpakete. Steigende Renditen könnten außerdem starke Auswirkungen auf die Märkte haben. Die neuseeländische Wirtschaft scheint vor der RBNZ-Zinsaufstellung an Stärke zu gewinnen, während Airbnb nächste Woche mit seinem ersten Geschäftsbericht als börsennotiertes Unternehmen die Berichterstattung über Large Caps anführt.

US-Verbrauchervertrauen sieht nicht so vertrauensvoll aus

Im Vorlauf der offiziellen Zahlen zum US-Verbrauchervertrauen, die nächste Woche erwartet werden, scheint das Verbrauchervertrauen im Februar bisher gefallen zu sein.

Vorläufige Zahlen des Verbrauchervertrauensindex der University of Michigan zeigten eine Abfall von 79,0 für Januar auf 76,2 im Februar, gegen die Vorhersagen von 80,5- 80,8.

Haushalt mit einem geringen Einkommen, also solche mit einem Jahreseinkommen von 75.000 USD oder weniger, scheinen das Vertrauen nach unten zu treiben. Nur 23% der Haushalte in dieser Gruppe gaben an, dass sich ihre Finanzen seit 2014 verbessert hätten und 71% sagten, dass sich ihr Einkommen gebessert hätte.

Interessant ist laut Umfragedirektor Richard Curtain, dass das Verbrauchervertrauen gegenüber dem Vormonat gesunken ist, obwohl Joe Biden die Mutter aller Konjunkturpakete vorbereitet hat. 1,9 Billionen USD an Hilfen sind auf dem Weg, die mindestens 1.400 USD in die Taschen eines jeden US-Verbrauchers stecken und zusätzliche kleine Unternehmen unterstützen würden. Im Dezember 2020 wurden außerdem 900 Milliarden USD an Haushalte mit niedrigerem Einkommen verteilt.

Hilfe ist auf dem Weg, aber im Moment sieht es so aus als wäre das Verbrauchervertrauen im Keller.

Zinsen und Dividenden reagieren auf steigende Renditen

Mit dem Ausverkauf der Zinssätze sind die Renditen gestiegen, was Konsequenzen für Anlageklassen wie Devisen, Aktien und möglicherweise sogar Kryptowährungen haben kann.

Letzten Dienstag hatten die Treasury-Renditen ihren größten Zugewinn in 3 Monaten. 10s stieg um 9 Basispunkte und erreichte so den Höchststand seit Februar über 1,3%.

Wie unser Chief Market Analyst Neil Wilson vor kurzem berichtet hat, sind einige wichtige Faktoren im Spiel, die die Inflation antreiben, allen voran:

  • Ein großes Volume pro-zyklischer Konjunkturprogramme
  • Extrem lockere Geldpolitik
  • Gehemmte Nachfrage
  • Sparwut

Europäische Aktien rutschen, mit dem steigenden Bedenken in den Köpfen der Anleger hinsichtlich der Zinssätze, ab, da die Änderung der absoluten Renditen sie unvorbereitet überrascht hat. Die Inflation in Großbritannien stieg von 0,6% im Dezember auf 0,7% im Januar, was an steigenden Kosten lag, da die Kosten für Möbel, Haushaltswaren, Restaurants und Hotels, Lebensmittel und Transport alle gestiegen sind.

Auch Gold ist bei den steigenden Renditen schwächer geworden.

Das muss man im Auge behalten, da steigende Renditen Auswirkungen auf die gesamte Investment- und Finanzwelt haben.

RBNZ Zinsbekanntgabe – Keine Änderung an der Kiwi-Front

Die Reserve Bank of New Zealand (RBNZ), die neuseeländische Zentralbank, wird nächste Woche eines ihrer seltenen Stellungsnahmen abgeben. Es wird nicht erwartet, dass große Zinsänderungen anstehen.

Neuseelands Wirtschaft hat sich im Pandemie-Jahr besser geschlagen, als die meisten anderen. Ein schneller, strenger Lockdown und Grenzkontrollen haben den durch Covid-19 verursachten Schaden klein gehalten, was Neuseeland in eine besser als erwartete wirtschaftliche Situation gebracht hat.

Der neuseeländische Dollar (NZD) hatte ein hervorragendes Jahr 2020, mit großen Gewinnen gegenüber dem Pfund, Euro und US-Dollar, und hat die Turbulenzen de ersten Jahreshälfte, unter anderem einen großen Abverkauf, gut verkraftet.

Man geht jetzt davon aus, dass keine weiteren Konjunkturpakete in Neuseeland notwendig sind. Kommentatoren glauben außerdem, dass die neuseeländische Zentralbank auch keinen Negativzins einführen wird.

Die Australia New Zealand Banking Group, einer der Top-Kreditgeber des Landes, erwartet keine Zinsänderung durch die RBNZ, was zum Teil auf die Stärke des NZD zurückzuführen ist, aber auch darauf, dass der Arbeitsmarkt des Landes sehr gut aufgestellt ist.

Die Arbeitslosenquote in Neuseeland ging im letzten Quartal etwas unerwartet auf 4,9% zurück, wobei auch in einigen Schlüsselsektoren die Unterauslastung der Arbeitskräfte zurückging. In einigen Bereichen der Wirtschaft tragen staatliche Konjunkturpakete dazu bei, Defizite in anderen Bereichen zu decken. Dies ist ein Segen für die Arbeitgeber, ein Segen für die Arbeitnehmer und ein Segen für die gesamte Wirtschaft. Die Exporte sind zusätzlich positiv geblieben.

Im Grunde genommen sind die Aussichten für Neuseeland kurzfristig immer noch gut. Einige gehen davon aus, dass die OCR 2024 steigen könnte. Man geht davon aus, dass die Inflation auf 2,5% bis Juni steigen wird, im laufe des Folgejahres aber wieder auf 0,8% zurückgehen könnte. Man sollte ein Auge auf Neuseeland behalten, aber es ist wahrscheinlich nicht schlau, einen kompletten Umwurf der Geldmarktpolitik in der Stellungnahme der nächsten Woche zu erwarten.

Airbnbs erster Geschäftsbericht als öffentlich gehandeltes Unternehmen

Airbnb ging im Dezember 2020 an die Börse und wird am 25. Februar den ersten Geschäftsbericht als öffentlich gehandeltes Unternehmen vorstellen.

Natürlich muss man alle Gewinne im Kontext der Pandemie betrachten. Laut der S1-Meldung war das Bruttobuchungsvolumen von Airbnb gegenüber 2020 um 39% auf 18 Milliarden USD gesunken, während der Umsatz in den neun Monaten bis September 2020 um 32% auf insgesamt 2,5 Milliarden USD gesunken war. Die strengen Lockdowns seit April 2020 in wichtigen Volkswirtschaften wie den USA, der EU und Großbritannien, haben das Reisen von Privatpersonen zum Erliegen gebracht.

Aber Airbnb hat eine enorme Marken-Wiedererkennung, die der Aktie und dem Geschäft helfen könnten, besser abzuschneiden als die Konkurrenz. Die Marktkapitalisierung in Höhe von etwa 120 Milliarden USD übersteigt die der online Urlaubs-Rivalen, wie Expedia (22 Milliarden USD), Tripadvisor (5 Milliarden USD) und sogar Booking.com (91 Milliarden USD). So blieben die Listings relativ stabil und fielen während der Pandemie nur um 2%. Im September 2020 wurden 5,6 Millionen registriert, während es im Dezember 2019 5,7 Millionen waren.

Langzeitaufenthalte (Buchungen über 28 Tage) gingen im April 2020, dem traditionell schlechtesten Monat für Hotelbuchungen, im Jahresvergleich nur um 13% zurück, zeigten jedoch zwischen Mai und September dieses Jahres ein Wachstum im Vergleich zum Vorjahr.

Eine vorhergesagt Marktchance in Höhe von 3,2 Billionen USD könnte das Interesse der Investoren an Airbnb am Leben erhalten. Kommentatoren zufolge hat Airbnb großes Potential in den drei schlüssel Angeboten:

  • 1,8 Billionen USD – Kurzzeitaufenthalte
  • 210 Milliarden USD – Langzeitaufenthalte
  • 1,4 Billionen USD – Erfahrungen

Darüber hinaus hatte Airbnb im Jahr 2019 247 Millionen Gäste, was 3,8% der geschätzten 6,5 Milliarden weltweit bezahlten Übernachtungsreisen in diesem Jahr entspricht. Wenn es gelingt nur 10% des potentiellen Marktes zu gewinnen, könnte Airbnb 340 Milliarden USD an Umsätzen im Jahr machen.

Das wird gelinde gesagt ein interessanter Geschäftsbericht. Wir werden den Einfluss der Pandemie auf Airbnb erkennen können und sehen ob die Grundlagen stark genug sind, diesen Sturm zu überstehen.

Die Aussichten könnten schon ziemlich gut zu sein. Das Anlegervertrauen scheint hoch zu sein. Airbnb Aktien schossen nach dem Börsengang 200% in die Höhe und Stand 15. Februar werden sie um den Höchststand gehandelt.


Top Wirtschafts-Daten der Woche


Date  Time (GMT)  Currency  Event 
Tue Feb 23  3.00pm  USD  CB Consumer Confidence 
Wed Feb 24  1.00am  NZD  Official Cash Rate 
  1.00am  NZD  RBNZ Monetary Policy Statement 
  1.00am  NZD  RBNZ Rate Statement 
  1.00am  NZD  RBNZ Press Conference 
  3.30pm  USD  US Crude Oil Inventories 
Thu Feb 25  1.30pm  USD  Prelim GDP Q/Q 
  3.30pm  USD  US Natural Gas Inventories 


Top Geschäftsberichte diese Woche


Date  Company  Event 
Mon 22 Feb  Berkshire Hathaway  Q4 2020 Earnings 
  Palo Alto Networks  Q2 2021 Earnings 
Tue 23 Feb  Home Depot  Q4 2020 Earnings 
  Square  Q4 2020 Earnings 
  HSBC  Q4 2020 Earnings 
  Thomson Reuters  Q4 2020 Earnings 
Wed 24 Feb  NVIDIA  Q4 2021 Earnings 
  Lowe’s  Q4 2020 Earnings 
  Royal Bank of Canada  Q1 2021 Earnings 
  Budweiser  Q4 2020 Earnings 
  National Bank of Canada  Q1 2021 Earnings 
  Puma  Q4 2020 Earnings 
Thu 25 Feb  Salesforce  Q4 2021 Earnings 
  Airbnb  Q4 2020 Earnings 
  Vale  Q4 2020 Earnings 
  Toronto-Dominion Bank  Q1 2021 Earnings 
  Moderna  Q4 2020 Earnings 
  Bayer  Q4 2020 Earnings 
  Dell  Q4 2021 Earnings 
  HP  Q1 2021 Earnings 
  Etsy  Q4 2020 Earnings 
  Telefonica  Q4 2020 Earnings 
Fri 26 Feb  Deutsche Telekon  Q4 2020 Earnings 
  BASF  Q4 2020 Earnings 

Rates selloff, Bitcoin kicks on to new highs above $51k

Having banged the inflation drum for some months, last Monday I noted that everyone’s suddenly talking about it. Now rates are really starting to worry. We are witnessing a sharp sell-off in rates with yields moving aggressively higher, which could spread into trouble in other asset classes like stocks, FX and even cryptos. This creates problems mainly because of just how quickly the move is happening.  Treasury yields had their biggest gain in 3 months on Tuesday, with 10s rising 9 basis points to hit the highest since February above 1.3%. The 2s10s spread widened to 1.18%, the widest since 2016. Breakevens keep moving higher – inflation expectations are becoming unanchored. I’ve expounded many times before on how the vast amount of pro-cyclical fiscal stimulus, ultra-loose monetary policy, pent-up demand and a savings glut will create a powerful inflationary impetus this year. I’ve also stressed many times that this environment, coupled with the Fed’s new average inflation targeting – which explicitly lets the economy run ‘hot’ –  could lead to inflation expectations becoming unanchored, just as they did in the 1970s. If inflation does start to move up the Fed may need to act. Allowing inflation to take off could eat away at real gains, but it will also help erase deficits. The question the Fed – and Treasury – need to ask themselves is whether deficits matter.

The ProShares UltraShort 20+ Year Treasury ETFs, which tracks double the inverse (-2x) of the daily performance of the US Treasury 20+ Year Bond Index for a single day, is exploding higher and is now up almost 20% this year. Vix March futures also advanced during a mixed session on Wall Street that left the Dow up 0.2% but the S&P 500 flat and small cap Russell 2000 0.7% lower. Higher rates hit bond proxies like real estate, utilities and health, whilst the chief reflation trade winners, energy and financials, rose.

The ProShares UltraShort 20+ Year Treasury ETFs is up 20% this year.

Stocks in Europe are sliding a touch this morning after Tuesday’s pause. Concern about interest rates moving up as quickly as they are is starting to worry some investors. It’s not the absolute yield that matters but the rate of change which is catching investors off guard. UK inflation nudged up to 0.7% in January from 0.6% in December as the cost of furniture and household goods, restaurants and hotels, food, and transport all rose. This is just the start though as the roaring 20s leads to roaring inflation by the end of the year. UK 10 year gilt yields are also at 1-year highs above 0.6%.

Bitcoin hit $50k and has kicked on to $51k – as mentioned yesterday the market is looking a lot different to how it did back in the 2017 bubble. Fundamentals remain problematic, but the market can remain irrational longer than shorts can remain solvent. Microstrategy – a business ‘intelligence’ company – said it plans to offer $600 million of senior convertible notes in order to buy more Bitcoin. To be fair, its bet last year on Bitcoin was a good one. It now owns 72k Bitcoin worth $3.6bn. Remember last year this started with an acquisition of 21,454 Bitcoins as part of its capital allocation strategy. Yet more corporate backing.

Meanwhile gold is weaker as yields (nominal rates rose faster than inflation expectations yesterday, pushing up real rates) and the dollar rose with prices testing the Feb 4th low at $1,784, with the key 50% Fibonacci retracement and Nov 30th low sitting at $1,764.

Gold is weaker as yields rise.

In FX, it looks like the move in yields has provided some respite for the dollar. Sterling has just come off its newly hit 3-year high at 1.3950 to put in a couple of near-term support markers around the 1.36860 area. Just some emerging signs of a bounce shaping up on the hourly chart. Dollar index making a fresh swing high.

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