Welcome back to our weekend reading,
This week saw world-moving economic announcements and global dissonance around vaccines, which were treated in equal weighting by the news cycle to two world leaders slinging playground insults and Elon Musk delivering the best job titles ever seen in a public company.
Let’s look back on the week.
Technoking and Master of Coin
Let’s start the reading off with a fun one.
Say what you will about Elon, he’s one of the most charismatic cult leaders you’ve ever seen.
In a recent filing to the SEC, Musk has added an additional title to his name, “Technoking of Tesla”, whilst CFO Zach Kirkhorn has been dubbed “Master of Coin”. That second name just about made me buy Tesla right there.
An additional filing announced a key personnel change of Jerome Guillien to become president of Tesla’s heavy trucking division – a product which was first prototyped near the end of 2017 and is proposed to have first deliveries by Q4 2021.
Naturally this made the share price rise, as any activity from the Technoking does; shares were up 2.8% on the day, although as you can see above the price remains significantly depressed from their levels even a month ago.
Fed Chair Powell has continued to project interest rates close-to-zero till at least 2023 this week, despite dramatically upgrading the Fed’s outlook for economic growth and unemployment rates in the next few years.
The FOMC upgraded its economic outlook and predicted a short-lived spike in prices, with core inflation rising to 2.2% this year before slowing to 2% in 2022. Depending on who you speak to in the market, this CPI figure is either spot on or it should be 20% for the next 10 years – assuming you include Michael Saylor in that poll.
The GDP forecast for 2021 was raised from 4.2% to 6.5%, which is a start to what Jesse calls “growing their way out of this hole”.
Their stance on asset purchases, something a lot of market observers seem to forget they have up their sleeve, remains unchanged and Powell said “it’s not yet time” to discuss tapering.
But here’s a set of numbers to wrap your head around;
- GDP growing from 4.2% to 6.5% by 2023
- Unemployment rates predicted to decline to from 6.2% (U3) this year to 3.5% (U3) in 2023,
- Wage growth is expected to change 0.0% by 2023.
So, the economy is materially stronger, more people are finding jobs, but wages are not expected to grow during this period of growth.
The Rich Get Crypto
Morgan Stanley have hit upon the perhaps reasonable strategy to only take the risk of trading and customising cryptocurrencies, for those clients who can write a big enough ticket to justify it.Morgan Stanley plans to offer wealthy clients access to three funds that will enable ownership of Bitcoin, with wealthy defined here as accounts of $2 million USD plus. . Institutions with over $5m in assets will also qualify, with accounts having to be at least 6 months old in both cases
Galaxy Digital runs two of the funds, with the third run by both FS Investments and NYDIG.
Kings of the Schoolyard
For those who were afraid we’d lose the spectacle of two superpowers exchanging schoolyard insults with the exit of Donald Trump from the political stage – fear not, Joe has you covered.
In an interview with ABC news Biden labelled Vladimir Putin as a “killer” (considering his career in the KGB, probably not inaccurate) and announced he would pay for interfering in U.S elections.
On behalf of Putin, Vyacheslav Volodin, the speaker of the lower house of Russia’s parliament, dismissed Biden’s comments as “hysterics born of helplessness,” saying they “insult the citizens of our country.”
For anybody who invested in a concrete bunker around the time it looked like Iran was going to start WW3, maybe don’t throw that tinned food out yet.
Europe Halts the Vaccine
Despite news that more than 410 million shots of COVID-19 vaccines have been administered across the globe, Europe’s largest nations have announced a halt to the Astra Zenica vaccine over concerns that it causes blot clots in a small number of patients.
Across the globe the latest vaccination rate was roughly 9.96 million doses per day. This rate has been gradually increasing over the last few months, with Israel still leading the way for total percentage of population inoculated.
Banks should love Blockchain
This week I listened in to a virtual Blockchain Expo, with the primary aim of learning more about the applications of blockchain technology in financial services and capital markets.
One takeaway I found is that banks should not necessarily be afraid of blockchain, unless you work in a transfer agent role. The material impact to their bottom line could be immense, and the savings/revenue generating capability of a digitized ecosystem would impact every level of the industry.
Aside from banks specifically, I’d like to share some key findings from a PwC report called ‘Time for Trust’, specifically their predictions for the financial benefits globally that blockchain could create in the next decade:
- By 2030, blockchain will increase global GDP by US $1.76 trillion
- Provenance and traceability: $962 billion
- Securitisation and payments: $433 billion
- Identity and credentials: $224 billion
- Agreements and disputes: $73 billion
- Loyalty and rewards: $54 billion
- China (US $440 billion) and USA (US $407 billion) to benefit most from blockchain
- Blockchain could add up to 40 million jobs globally
- Identify Public Administration, Education and Health as the largest global beneficiaries ($574 billion) in which the highest efficiency improvement would be in Identity and Credentials
Now, if one company could take even a fraction of that growth, that would be an investment opportunity.
*All numbers in USD from BofA Securities
Equities: Record week of $68.3bn into equities
Bonds: $8.3bn into bonds
Precious Metals: $0.1bn into gold
Flows to Know
Record week of financial inflows ($11.2bn)
2nd largest inflow to consumer cyclicals ever ($2.2bn)
The USA “twin deficits” continue to march on
Annual Global Equity Flows
Tech Valuations peaking at 33% of global equity market cap in Q1 2021
Rapid Fire Round
There were a lot of great anecdotal stories this week, so I’d like to introduce the inaugural edition of the weekly Rapid Fire Round;
- Ray Dalio has come out and said its “time to buy stuff”, amid the economics of bonds which he describes as stupid, “Rather than get paid less than inflation why not instead buy stuff — any stuff — that will equal inflation or better?”
- Samsung has warned that a global shortage of semiconductors are spreading beyond the automaking industry and that a “serious imbalance” could create fallout in the mobile device sector
- The International Energy Agency has announced that global oil demand won’t return to pre-pandemic levels until 2023, with subdued growth for the foreseeable future after new working habits (WFH) have impacted travel demand
- Bill Gross managed to snag a $10 million USD payday shorting Gamestop, noting that he “got in too early” and was in the hole by $10 million at one point and had to hold on to work the position into profitability
Our morning calls continue, please do tune in for a daily dose of market insights and access to some leading experts in the funds management field.
Have a safe and enjoyable weekend.
— Max and the Mason Stevens team.
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The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.