Welcome back to Weekend Reading.
Another week, another volatile period for markets. After a disappointing performance in September, equity markets seem to be doing their utmost to claw back some green percentage points these last two weeks, whilst domestic and global fixed income are left flat or down. We are already yearning for the days of everything going up-and-right in unison.
Let’s look back on the week.
Watch this List
Well, Coinbase may not have even launched their marketplace for NFTs yet, but you can bet that didn’t slow down the crowd from rushing in.
Within a few hours of announcing they would be opening the service, their servers buckled under the demand – one million sign-ups in the first day.
Coinbase is yet another large institution (albeit this one more obvious than someone like Twitter) entering the wild NFT market. It does also come off the back of their investor update in August, which revealed that customer retention and usage was slowing down, so diversifying their service and creating new revenue streams is a logical move for the company.
Shares in the company bounced up during this week on the back of the news, trading from $229 USD on Monday to close last night at $260 USD.
Maybe they can make an NFT of that chart?
Going to Zero
Speaking of wild digital asset markets, Bitcoin.
I’d like to clarify two things:
Firstly, despite it being a lot of fun to make fun of the crypto cult, I am a big fan of digital assets myself – my crypto sensei Mike Young is slowly helping me become less of a simpleton in this regard.
Secondly, I am not Jamie Dimon, CEO of JPMorgan… not sure why you would think I was in the first place.
But the very same Jamie Dimon came out this week to address the issue of crypto regulation, particularly given the rising concerns around stable coins over in Washington. He went further to directly say, “I think Bitcoin is worthless”, but conceded that his clients may disagree and although his bank could not offer custody, they would offer clients access to crypto markets.
By this point in time I think the “Bitcoin going to zero” argument is frivolous. There are around ~19 million BTC in circulation at the moment, do you think that after all the attention and potential seen in the coin, someone wouldn’t come along at $1.00 and buy the whole lot?
Like gold, BTC is worth what people think it’s worth, no more and no less. Free market, baby.
Texas Red, not Texas Gold(man)
After new state laws in Texas – and you may double take reading this – “seeking to punish Wall Street banks for wading into the gun control debate” were introduced recently, Goldman Sachs is apparently making a tactical retreat from the state with its public-finance business.
Granted, banking would be a tricky business to be in when you operate in an open-carry state: imagine trying to re-possess a house, and the owner is pointing a legally owned sniper rifle at you from a 1km away.
Goldmans is joining Citi and JPMorgan in a direct retreat, whilst Bank of America has quietly not done any new Texas bond deals yet this quarter.
According to Bloomberg, one of the laws bans Texas local government entities from doing business with any banks which have “moved to curtail ties to the firearms industry in the wake of U.S. mass shootings”. Another law places the same ban on companies which have shunned fossil fuel producers.
We’ve talked about how there are some interesting “anti-ESG” trades out there, but this one is by far the largest step in the opposite direction in such a public manner. Everything’s bigger in Texas.
Chips and Apples
Apple has announced it will cut iPhone 13 production targets for the remainder of 2021, potentially up to 10 million units, as chip shortages continue to plague the electronics industry.
Pictures tell a thousand words, and since this piece is meant to be sub 1,000 words, let’s illustrate the story in two graphs:
And this next graph is one of the largest semiconductor ETFs in the world:
*All numbers in USD from BofA Securities
Equities: $11.8bn into equities
Bonds: $77mn into bonds
Precious Metals: NIL this week
Cash: $7.3bn out of cash
Flows to Know
- Weak credit market with 1st outflows from all IG, HY and EM bonds since May 2021
- Equity stalling after major $800bn inflow YTD
- 1st redemptions from EM across debt and equity since August 2020
- Tech, financial and energy inflows strong
Higher Wage Inflation = Higher Fed Funds
Annualised 6-month headline CPI change
NYSE Composite Trading Sideways
A Dirty Word
Atlanta Fed Chair Bostic has noted this week that “transitory is a dirty word” in his office, quoting the by now infamous:
“It is becoming increasingly clear that the feature of this episode that has animated price pressures — mainly the intense and widespread supply-chain disruptions — will not be brief,”
In the wake of many observers turning away from the transitory inflation thesis, this may add more wobbles to an already shaky market, particularly as the term “stagflation” is throwing around, a period of high inflation and low growth which will surely be a dampener on capital markets.
Such is the title of this note, and much like your high school formal, it’s never a good time showing up stag.
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.
Tune in from 9:30-10:00am AEST, Tuesdays and Thursdays.
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.