Mikkel Rosenvold
5 weeks ago

Macro Mondays: Escaping the TRAP of Sideways Markets

Andreas Steno, Mikkel Rosenvold And Mads Eberhardt talk macro and crypto

Transcript (Edited):

Hello out there! Welcome to a new edition of Macro Mondays. My name is Andreas Steno and I'll be your host as we navigate today's show. We had a great start on our new YouTube channel, now being published on the Real Vision YouTube channel. We're still available as a podcast, but we're trying to incorporate more charts in the YouTube version. It's obviously much easier to see them there than on a podcast.

Overview of the Week’s Topics

With me today in the studio are Andreas and Mads, our crypto analyst. We're going to cover a lot of ground today, including Bitcoin, the Mexico-US labor market, and a sneak peek into next week. So, let's jump right into it.

Bitcoin Inflows Discussion

Mads, you wrote a great piece on the inflows into Bitcoin. What's going on?

Mads: Over the past week, we've seen massive inflows into US-based Bitcoin ETFs. On Tuesday, there was a total net inflow of nearly $900 million in a single trading session. This demand is continuing, and it was the second-biggest inflow on a single day.

Andreas Steno: It coincides with Roaring Kitty being back in the limelight on YouTube and meme stocks seeing inflows. There's definitely some coincidental timing there.

Mount Gox Bankruptcy Update

Mads: Mount Gox was previously the single largest crypto trading venue, handling about 70% of the total Bitcoin exchange volume. In early 2014, they went bankrupt due to a hack that went unnoticed for years, resulting in a loss of around 600,000 Bitcoins. The bankruptcy process has taken years, but it's expected that the state will hand out the remaining 141,000 Bitcoins to creditors by October 31st.

There's concern that once these creditors are paid, they might liquidate the Bitcoins, affecting the market. However, we don't fear this because many of these creditors are long-term holders who will likely keep the Bitcoins in their personal holdings.

Meme of the Week: Jay Powell

Andreas Steno: Here's a meme I created. It's a picture of Jay Powell saying, "I'm not going to cut interest rates until you pants stop buying GME calls," referring to the GameStop frenzy this week.

Interest Rate Cuts and Risk-Taking

We've seen increased risk-taking with huge inflows into Bitcoin and GameStop meme stocks. This is interesting given that the Bank of Canada and the European Central Bank cut interest rates for the first time in this cycle. The expectation is that the Federal Reserve might follow with an "insurance cut" in September despite high inflation. Rate cuts are being taken as an excuse to add to risk, which is a bit contrary to earlier cutting cycles.

Trump Soundbite and US Labor Market

Let's talk about the US labor market. We discussed Mexico's election last week. Claudia Shanban won as expected, but the market reaction was surprisingly negative. Despite this, not much has changed politically. The Mexican peso saw a significant move after the election. This highlights the strong structural case for the currency, with Mexico well-positioned to handle trade flows between the US and China.

Transformation of the US Job Market

The US job market is transforming into more of a gig economy. This week’s labor market data points in various directions, showing a low-hiring, low-firing economy. Tiny employers, or those with 1-9 employees, are adding the most jobs. This is a significant change since the pandemic, with many businesses opening relative to closures.

Listener Feedback: Job Interview Traits

We received feedback about traits encountered in job interviews with recent college graduates. Highlights include struggling with eye contact, asking for unreasonable compensation, dressing inappropriately, and some even bringing parents to interviews. This reflects a changing labor market and workplace dynamics.

Upcoming Week’s Focus: Liquidity and Inflation

Looking ahead, we expect numbers on liquidity and inflation. J. Powell will take center stage on Wednesday, with the Federal Reserve updating forecasts. The liquidity outlook is positive, with an expected increase in T-bill issuance attracting money from the overnight reverse repo facility into the economy. This positive liquidity trend is also seen in Bitcoin and meme stocks.

Portfolio Strategy: China vs. India

We've taken profits recently, particularly from Chinese copper reserves. There's an interesting dynamic between China and India. Investors are shifting from China to India, reflecting in negative correlations between their equity markets. This competition for foreign investments is significant for EM strategies.

Inflation Protection Strategy

For portfolio security against a weak dollar and potential rate cuts, we recommend inflation protection through treasury instruments or crypto assets. Metals might not be the best choice due to cluster risks and halted gold purchases by China.

Conclusion

To follow all our analysis, visit stenoresearch.com for trade alerts and insights, including our crypto analysis. Remember, sometimes we're good, sometimes we're not, but we always aim to entertain and inform you.

Thank you for joining us. We'll see you next week. For more great content, visit Real Vision to understand the complex world of finance and the global economy.

Disclaimer

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