Fly me to the Moon
With more and more established institutions getting involved (the latest being BlackRock), more and more BTC are going into cold storage and into the hands of long term investors.
We have been calling for Bitcoin to go higher since last year, and while the market broke decisively above 50k yesterday, it is still some distance to our target of 80–85k for this year.
With more and more established institutions getting involved (the latest being BlackRock), more and more BTC are going into cold storage and into the hands of long term investors.
There will eventually be a shortage of BTC to go around, and the attendant surge will be something to behold. Till then, hold on to your hats!
TRADING PLAN
- Currencies : Keep short USD and long NZD, CNH & TRY. Stay with the position and look for opportunities to add.
- Commodities : Silver — Supports for Silver are at 21.80–90 and at 24.70–80. Range trading for now.
Key risks: Continued rise in US yields that may lead to a stronger USD is the key risk.
3. Equities : Keep long US Tech and China A50 Index Futures. Support for A50 is at 19050–19100. A retracement at last. Look for opportunities to add.
Key risks : Stimulus progress and vaccine distribution/efficacy. Higher US yields is also a risk.
WHAT HAPPENED YESTERDAY
- U.S. January retail sales surged 5.3% month-month (expected +0.8%), aided by the receipt of stimulus checks and pent-up spending activity, and more than neutralized the downward revision for December to -1.0% from -0.7%. Excluding autos, retail sales soared 5.9% month-over-month (expected +0.7%) and more than made up for the downward revision for December to -1.8% from -1.4%. Sales were up solidly across every retail category, offering an early sign of the added spending and economic recovery potential that can be expected from another round of proposed stimulus checks.
- The Producer Price Index for final demand jumped 1.3% month-over-month in January (expected +0.5%) — the largest increase since the index began in December 2009 while the index for final demand, less foods and energy, rose 1.2% month-over-month (expected +0.2%).
- The initial reaction to the aforementioned data releases was Dollar positive and equity negative, partly because long-term interest rates resumed their quick ascent, which weighed on the valuations of growth stocks. GBP fell 0.3% to $1.39, having reached its highest level since April 2018 on Tuesday. The 10-yr yield, which rose 10 basis points yesterday, touched 1.33% (+3 bps) immediately after the data but ended 1 basis point lower on the day at 1.29%.
- Minutes of the U.S. central bank’s Jan. 26–27 policy meeting showed that Fed officials last month debated how to lay the groundwork for the public to accept higher inflation, and also the need to “stay vigilant” for signs of stress in buoyant asset markets. “Participants observed that the economy was far from achieving the Committee’s broad-based and inclusive goal of maximum employment and that even with a brisk pace of improvement in the labour market, achieving this goal would take some time,” the minutes said. The Fed made few changes to its policy statement at its meeting in January. It is scheduled to release its next policy statement and new economic projections on March 17. “We’re going to be patient,” Fed Chair Jerome Powell said at the news conference after the end of last month’s policy meeting. “We’ll seek inflation moderately above 2% for some time … The way to achieve credibility on that is to actually do it. And so that’s what we’re planning on doing.”
- S&P 500 (-0.03%) finished flat on Wednesday, battling back from an early -0.8% decline after finding support at the 3900 level. The Dow Jones Industrial Average (+0.3%) eked out a closing record high, while the Nasdaq Composite (-0.6%) and Russell 2000 (-0.7%) closed lower amid profit-taking pressure. Nasdaq was down as much as -1.15% at one stage, before fighting back at the end to reduce the losses.
- BlackRock ($8.7 Trillion Asset Manager) CIO said the asset management giant “is starting to dabble” in Bitcoin, but did not elaborate further on what that means for its operations.
HEADLINES:
Texas power prices spike as deadly cold wave overwhelms grid
Notable Snippet: ERCOT’s (Electric Reliability Council of Texas) website showed wholesale power prices deliverable over the next five minutes broke above $10,000 per MWh earlier this week. Prices were over $9,000 earlier on Wednesday morning. Real-time prices were less than $50 per MWh before the cold blast hit Texas.
THEMATIC CONTEXT :”Traditional energy is here to stay and the ESG “dream” of having the world run on Solar, Wind and Hydro is far fetched from a practical point of view. The only energy source that can truly sustain such large energy demands while remaining “Green” is nuclear power and for that reason, we believe uranium to be the most mispriced/underpriced asset in the coming supercycle. In the meantime, traditional energy supply/demand imbalance will only be brought forward, leading to an interim bull (years) market in the traditional energy space. We remain heavily invested in this theme.” — 16th Feb 2021
Ford’s Europe car lineup to be all-electric by 2030
Notable Snippet: The №2 U.S. automaker said that by 2026 it will have electric versions of all its passenger cars on sale in Europe and that by 2030 two-thirds of its commercial vehicle sales in Europe will be fully electric or plug-in hybrids. The company said it will have plug-in hybrid or fully-electric versions of its entire commercial vehicle range available by 2024.
Ford currently dominates the U.S. and European markets for gasoline-powered commercial vehicles with shares of 40% and almost 15%, respectively. Ford said this month it was “doubling down” on connected electric vehicles and said it will invest $22 billion in electrification through 2025, nearly twice what it had previously committed to EVs.
THEMATIC CONTEXT: “Rare Earths should enter a super cycle in the years ahead as it is essential to the “Green Narrative” that underpins most ESG investment mandates that are being adopted by institutions globally. And in the context of deglobalization, rare earth miners and supply chains outside of China will only become more valuable over the next decade. Lynas Corp is one of the only companies actually producing meaningful amounts of REs outside of China.”- 8th Oct 2020
COMMENTS/IMPACT: Rare Earths companies are breaking out into escape velocity as it is a company of strategic and geopolitical importance to western allies. We remain invested and bullish on the prospects of this sector. Find out how are we playing this.
Italy’s new PM Draghi promises sweeping reforms, urges national unity
Notable Snippet: In his maiden speech to parliament, the former head of the European Central Bank said his broad-based administration would throw all its efforts into defeating COVID-19, while looking to leave a stronger, greener nation for future generations. “Today we have, as did the governments of the immediate post-war period, the possibility, or rather the responsibility, to launch a new reconstruction,” said Draghi, ahead of a mandatory confidence vote he is expected to win with ease.
DAY AHEAD
G7 Biden will attend his first G7 summit (virtual meeting) as the US President and will likely use this chance to stress the return of the US to multilateralism. He’s expected to discuss plans to defeat the pandemic, rebuild the global economy and deal with China as a cohesive group. Expect this to be risk positive as it’s a step towards finally having a coherent global policy to living with the pandemic till vaccination efforts succeed.
SENTIMENT
FX
STOCK INDICES
MARKET OBSERVATION
Massive Stimulus Discussed
It would appear that the World Economic Forum and BlackRock’s Larry Fink are on board with massive infrastructure spending that Friedman describes, with Fink calling for a $50 trillion stimulus to address the climate emergency.
It appears a narrative continues to be established for the US to earn its way out of its debt the same way it did the last time US debt was this high and foreigners were not buying enough USTs (immediately after World War 2, below):
Massive domestic infrastructure building, a Cold War, favourable demographics and a cooperative Fed kept long-term UST yields 500–800 bps below year-over-year nominal GDP growth for the vast majority of the ensuing 34 years.
In our opinion, the “Green New Deal” version of the same playbook is being established. US real interest rates (nominal interest rates minus inflation) are likely going to be increasingly negative for years to come i.e. inflation will be higher than nominal interest rates.
This is likely good for Bitcoin, Silver, Commodities, Industrial stocks, and Tech stocks. It is likely not good for bonds (on a real basis), or the USD.
Phan Vee Leung
CIO & Founder, TrackRecord
