Currency
It was one month ago in what was JPMorgan’s 4th consecutive – and failed – attempt to smack down cryptos when the bank’s strategist Nick Panigirtzoglou wrote that Tesla’s recent $1.5BN purchase of bitcoin would be a one-off and no other institutions would follow Musk (and Microstrategy, and countless other banks) into converting some of their cash into bitcoin. Our response was simple:
No, Nick, you are painfully wrong again… just like you were wrong the last time you looked at your favorite GBTC as a proxy of… something… and predicted that bitcoin would drop. It did not. Furthermore, it’s not “irrespective of how many corporates follow Tesla’s example” – that’s precisely the ballgame right there. Once we get two more companies, then 4, then 8, well even quants know what sequences that is.
Once again, we were right and one of JPM’s top quants was wrong because over the past 24 hours, not one but two major institutions have announced their plans to convert substantial amounts of fiat into crypto.
On Sunday, Hong Kong-listed Meitu which makes image and video processing software, said it had purchased $22 million in ether and $17.9 million of bitcoin, making it the first time a firm has disclosed a major purchase of ETH for its treasury. Meitu said it bought 15,000 ETH and 379.1 BTC in open market transactions on March 5.
Meitu said it’s evaluating the feasibility of integrating blockchain tech into its overseas business, including launching Ethereum-based dApps. ETH is the native token of the Ethereum blockchain. It’s also evaluating potential investments in blockchain-based projects, many of which accept ETH as consideration for investment.
As Coindesk reports, while the company said that while buying crypto helps diversify its holdings away from cash, “More importantly, the Board considers this a demonstration to investors and stakeholders that the Group has the vision and determination to embrace technological evolution, and hence preparing its foray into the blockchain industry.”
But the bigger story here is the one of the snowball effect, because as one becomes two, two becomes four, and so on, more and more companies will jump on board – as we predicted back in January – and that’s precisely what is going on because just hours after the Meitu news, Bloomberg reported that Norway’s oil billionaire Kjell Inge Rokke “has come out strongly in favor of Bitcoin, as he bets the cryptocurrency will prove the best defense against the disruption facing the finance industry and central banking.”
According to the report Rokke’s Aker ASA, a giant energy conglomerate which controls oil and oil service companies and has more recently branched out into green tech and renewable energy companies, is setting up a new business, Seetee AS, to tap into the potential of Bitcoin, according to a statement on Monday.
For now, Rokke’s investment will be small, and Seetee will start with just 500 million kroner ($58 million) in capital. The firm plans to keep all its liquid investable assets in the cryptocurrency. Aker’s Seetee will focus on investing in Bitcoin, establish partnerships with leading players in the Bitcoin and broader blockchain community, launch Bitcoin verification operations and invest in innovation projects and companies.
“Bitcoin may still go to zero. But it can also become the core of a new monetary architecture,” Rokke, Norway’s second-richest person with an estimated $5.4 billion net worth, wrote in a shareholder letter. He says it’s not inconceivable that one Bitcoin could one day “be worth millions of dollars.”
“People who know the most about Bitcoin believe its future success is nearly inevitable,” Rokke said.
The Norwegian billionaire is only the latest to adopt on the controversial crypto bandwagon which has emerged as the clearest separation line between dead-end Keynesian zealots and their amateur echo chamber scribes, who clutch a failed fiat religion as the answer to all the problems caused by fiat, and libertarians who see crypto as the transition medium to a new monetary world, one unburdened by the idiocy of central planning in any form. And despite growing anger by establishment economists who see themselves obsolete in a new non-fiat world, Bitcoin is being increasingly more embraced by some of the most influential members of the global financial industry. Goldman Sachs Group Inc. is currently working to restart its cryptocurrency trading desk, as it responds to substantial demand for digital assets from institutions.
The situation is different now compared with the 2017 Bitcoin bubble due to “huge” institutional demand across different industry types and from private banking clients, Matt McDermott, global head of digital assets for Goldman Sachs Global Markets Division said.
But back to Aker, which has been active in investing in industrial software, fintech and green energy value chains as the culmination of its 160 year history. Its latest venture into cryptocurrency is intended to help pursue developments in cyber security, financial transactions and emissions-free verification operations, it said.
“The direction is clear: finance will be disrupted as surely as fossil fuels will be,” Rokke said. “The question is not if, but when.”
Rokke’s full letter is here (pdf link)
Author and podcast host Tim Ferriss has done his share of heavy lifting when it comes to supporting and promoting research on psychedelic drugs. He’s invested millions of his own, and also organized half the $17 million in commitments it took to start up the Johns Hopkins Center for Psychedelic & Consciousness Research. While his efforts highlight the reality that psychedelic therapy, like any other medical treatment, requires significant amounts of money for research, Ferriss recently tweeted his apprehension about a side effect of the growing money-generating psychedelic market.
“I am very concerned by the patent land grab warming up in the for-profit psychedelic world,” he wrote, asking publicly if there was any coalition of pro-bono lawyers who could intervene “when companies attempt to secure broad patents that could hinder scientific research, reasonable competition…and so on?”
Patent announcements are hard to miss in the psychedelic field these days. Most recently, as Troy Farah wrote in Future Human, the biotech startup CaaMTech was granted a patent for the combination of cannabis and psilocybin. A patent application from mental health company Compass Pathways garnered attention for including claims on very basic elements of psychedelic psychotherapy—from holding hands to using soft furniture.
The size of the stimulus deal is keeping the Treasury market on its toes, with short positions on the securities hitting a record level last week. The yield on the 10-year Treasury was holding around 1.6% this morning on continued bets that extra government spending could overheat the economy. Aside from fiscal matters, investors will also have to digest decisions from the world’s major central banks in the next 10 days.
Central banks helped save the world economy from depression as the pandemic struck. Now they are dealing with the hard part: managing the recovery amid a difference of opinion with investors.
Optimism that Covid-19 vaccines and continued government stimulus offer an escape from the worst health crisis in a century has sent bond yields soaring and pushed bets on rising inflation in the U.S. to the highest in a decade.
It’s almost as if the Biden administration and some of the most progressive Democrats out there, want the market to crash.
As a reminder to readers, the biggest reason why yields surged yesterday during Powell’s pow-wow is because the Fed chair refused to address the topic everyone has been obsessing over, namely what will be the fate of the SLR exemption which expires at the end of the month and which, unless renewed, will lead to dramatic balance sheet shrinkage across US banks leading to a violent deleveraging as banks are forced to dump bonds accelerating what is already a violent selloff in rates (read our full discussion on the SLR in “Why The SLR Is All That Matters For Markets Right Now“).
So, adding even more fuel to the fire, overnight Politico reported that the FDIC Chair Jelena McWilliams said it doesn’t seem like banking agencies need to extend an emergency move that made it cheaper for insured depository institutions to hold cash and U.S. government bonds on their balance sheets. The most important question rests with the Federal Reserve, she said.
“That’s because capital requirements for the parent holding company, which is regulated by the Fed, are more important for determining how expensive it is for those banks to hold Treasuries, she said.”
As a further reminder, late last week, Senators Elizabeth Warren and Sherrod Brown urged U.S. regulators to reject lenders’ appeals to extend the SLR exemption. In a joint letter to the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency, the Democratic Duo argued that the banking industry is taking advantage of the coronavirus crisis to “weaken one of the most important post-crisis regulatory reforms.” Warren of Massachusetts and Ohio’s Brown, who took over the Senate Banking Committee this year, said granting the extension would be a “grave error.”
As we said in response, perhaps that would indeed be a grave error “but a bond market crash and deeply negative short-term yields would be a far more grave error, especially to the Democrats who are demanding that the Fed monetize trillions in debt in 2021 to fund Biden’s trillions in fiscal stimulus bills, something the Fed would not be able to do if the SLR exemption was not indefinitely extended.”
In other words, for whatever reason – and it certainly may be because they simply have no idea how dire the consequences would be, it now appears that there is a full-court press by the administration and Democrat politicians to not renew the SLR and unless the Fed steps in and overrides this, brace for impact as banks will have no choice but to dump tens of billions of holdings into the open market sparking the next full-blown crash as first yields soar and then all high-duration stocks, i.e., growth names, crater.
Jason Kilar provides accidental insight into why mainstream networks don’t want lockdown restrictions to end.
WarnerMedia CEO Jason Kilar apologized after celebrating the fact that the COVID-19 pandemic has been “really good for (CNN) ratings.”
Kilar made the initial remarks during the Morgan Stanley Technology, Media and Telecom Conference.
“It turns out that pandemic is a pretty big part of the news cycle, and that’s not going away anytime soon,” Kilar said.
“If you take a look at the ratings and the performance, it’s going well. And I think it’s going well because, A, the team at CNN is doing a fantastic job. And B, it turns out that the pandemic and the way that we can help inform and contextualize the pandemic, it turns out it’s really good for ratings,” he added.
-
I know Mike is a very solid investor and respect his opinions very much. So if he says pay attention to this or that - I will.
~ Dale G.
-
I've started managing my own investments so view Michael's site as a one-stop shop from which to get information and perspectives.
~ Dave E.
-
Michael offers easy reading, honest, common sense information that anyone can use in a practical manner.
~ der_al.
-
A sane voice in a scrambled investment world.
~ Ed R.
Inside Edge Pro Contributors
Greg Weldon
Josef Schachter
Tyler Bollhorn
Ryan Irvine
Paul Beattie
Martin Straith
Patrick Ceresna
Mark Leibovit
James Thorne
Victor Adair