Good morning everyone, hopefully you are all having an excellent start to your week thus far. Thank you for joining me and welcome to Episode 3 of Season 2 brought to you by Magnelibra Trading & Research. This episode is entitled “Consumer Credit Tumbles or Did It & US Govt dumping Bitcoin”
Quick Disclaimer: The following podcast is for educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and may not be appropriate for all listeners.
What timing in regards to Bitcoin dropping below that $97k marker as The US Department of Justice (DOJ) has been authorized to sell approximately 69,370 Bitcoin seized in connection with the Silk Road darknet marketplace, which is currently valued at around $6.52bn. So much for that US strategic BTC reserve, unless the govt is now in the trading business and plans on buying BTC down at the 200wkMA, which we believe is a very stellar move on that part if that is indeed the case!
Also we wanted to touch on the CA fires where many people are left fleeing their homes and we hope and pray that everyone finds a safe avenue out of there. We know these natural disasters all to well living in FL, so we can relate. We touched upon the insurers yesterday and we won’t get into that now but we hope these home owners have policies and we hope that there will be some resolution in the future to dealing with these issues. Its a complex topic, especially when you have high home values that are built in areas of exclusivity, who is at risk? Why should everyone suffer higher premiums because people choose to build in these areas? There are many valid arguments, but at the end of the day, there are always solutions. We believe there is an opportunity here for public/private partnerships to develop that can work together to accommodate insuring these areas. There are many solutions but seems like very few people in power or at least in the industry that want solutions, it seems the industry has stagnated so long on the premise of collecting premium after premium and without much risk year after year, then all of a sudden much like when volatility picks up, well solid returns turn into redemptions if you don’t hedge yourself correctly. Then again I guess this is why you pay actuaries so much…anyway thoughts and prayers to all those affected:
The FOMC Minutes:
Minutes stated that the Fed was at or near a point at which it would be appropriate to slow the pace of easing and participants indicated if data came in about as expected, it would be appropriate to continue to move gradually toward a more neutral policy stance.
OK first off, this doesn’t really mean anything, FOMC neutral rate is not a set rate, and we all know they are very “data dependent.” So this really didn’t tell us much other than the continued apparition that the FOMC chases a ghost protocol. A protocol that punches you in the face with the mantra of stable prices and maximum employment, yet delivers dot plots that are the equivalent of having your kids through darts at a whiteboard!
Magnelibra knows the FOMCs real inflation target is 3% and we are below there now, which is why the FOMC is cutting rates, because the trend in inflation is lower. The only thing keeping prices from plunging are conglomerates that own everything and are immune for some period of time to slowdowns in aggregated demand. There is always a steady demand for consumer cyclicals, yet that demand can be supplanted by credit and we all know that credit has been pushed to all time highs:
Some will say but Magnelibra, what about yesterday’s consumer credit number? Yes total credit did fall by $7.5 billion after a revised $17.3 billion gain in October and Outstanding credit-card and other revolving debt decreased by $13.7 billion. However I think we will see that CCs were supplanted by the buy now pay it later crowd:
Here is a list of players who may be supplanting traditional CC use and most undoubtedly the future securitized problem area for the future. This industry is in hypergrowth now but I see the writing on this wall for later. Anyway here is a quick list of the Buy Now, Pay Later (BNPL) companies:
Affirm:
Publicly traded company (NYSE: AFRM). Heavily backed by venture capital firms like Khosla Ventures, Spark Capital, and Andreessen Horowitz in its early stages.
AfterPay:
Acquired by Block (formerly Square) in 2021. Previously heavily funded by venture capital firms like Sequoia Capital, Index Ventures, and DST Global.
Klarna:
Privately held, but has raised significant funding from venture capital firms like Sequoia Capital, Silver Lake, and Bestseller Group.
PayPal Credit:
Owned by PayPal, a publicly traded company (NASDAQ: PYPL). PayPal has a long history of venture capital backing in its early stages.
BTW that last one PYPL has been our top favorite stock for the next 3 years…we posted that on the lows near $58 so keep an eye on that one.
In other credit news on Tuesday the CFPB announced that it will remove $49 billion in medical debt from more than 15 million Americans’ credit reports. This means that lenders will no longer be able to factor medical debt into decisions about mortgages or car loans. (pymnts) Great news indeed, but when you look at this in the context of other things, like how much has the U.S. sent to Ukraine for its military operation??? $113Bn, maybe American’s would have rather had that directed elsewhere, don’t you think.
See this is one of the reasons I started writing, because the more and more I understood about trading, investing, the players involved, the more I realized one thing, a very few profited and the majority were just like NPCs. I found the distribution of our monetary system to be well designed to act like a cyclone, taking everything in its way and focusing it into a very tight circle. I guess much of nature is that way. Anyway I figure I needed to make sense of it all further, break down complex issues, complex processes and whittle them down so that I can easily understand what mechanisms are driving it all!
One main theme is always look at things from a contextual viewpoint. Like that last tidbit on $49Bn in medical debt vs $113 to Ukraine, I can’t think of any rational American Citizen would look at that and say if we voted on this measure as a nation, which way that vote would go…ID required of course!
Anyway moving along, lets get into the market settles from yesterday we rolled Crude and Nat Gas, the big winner on the day was Copper and the loser Bitcoin:
As far as the rolling changes the Metals complex and the DAX are the weekly standouts with the bond market the big loser:
Speaking of US bond markets, these higher yields in the long end seem a bit stretched and it may be time for HFs to start piling into the long US30Y On the Run vs shorting the TLT ETF. That is a trade for the sophisticated HF balance sheet types, not for you novices out there…anyway the TLT has been battered and bruised and it is the longer end proxy ETF. Anyway might be something to watch here as the TLT is reaching some deep oversold levels:
As far as the US yield curve the steepening has been fast and furious and what we would expect in a rate cut regime:
Long time listeners know we are awaiting that first NFPayroll negative number, once we do, we will suspect the US curve to level off as the long end gets bid and yields tumble…so let’s see what tomorrows number holds!
Ok let’s look at the Magnelibra CTA Markets Sentiment Tracker where as of close yesterday +1s are ES, NQ and YM, we don’t always see eye to eye with the sentiment indicator btw but that’s the point of models, emotions don’t dictate it!
Ok so let’s take a look at the MEGA8s now with a pretty muted day with META -1.16% the big loser and as a grouping lost just $6bn in market cap no hedge yet either:
As far as the MicroStrategy Tracker the package is basically unchanged after a little over a month of action:
***Regular Stock Market is closed to observe Jimmy Carter National Day of Mourning
Ok that is it for today, we leave you with a little more data on the monetary side, this time we highlight the top 5 wealthiest tech giants here in America. We focus upon 1% of their net worth as if they took that 1% and gave away $100k per day and demonstrated it in consecutive years they could do that for. Elon Musk tops the group and could hold a lottery everyday on “X” and give a random user $100k every day for the next 77.4 years:
So every day for 77.4 years, give away $100k, how would that affect society? How would that type of wealth distribution change things? Pretty profound to think about, I think of it from a family perspective, who’s kid could develop or have access to certain tools, education, training, what burdens could be lifted from this. The societal outcomes are profound, incalculable but certainly something we as a society given that everyone makes up the fertile breeding ground for creating this wealth, we need to think about how we concentrate power and wealth. Anyway, just more data to ponder! OK guys that is it, we hope you learned something today, we hope you subscribe and support the efforts, I wish you all the best, the luck in the world and hope you strive for continued success in all that you do, till next time, cheers!
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