The Investment Asset of the Century Makes yet another Comeback
Even the most ardent cryptocurrency bulls are probably slightly slack-jawed at this juncture and can hardly believe it. To be sure, many people were undeterred by the vicious bear market that saw BTC melt down from just below $20,000 in Dec. 2017 to less than $3,300 in Dec. 2018, but we doubt that even these steadfast believers in the grand-daddy of cryptocurrencies expected to see new all time highs in less than two years. Oh well…
Look who’s back from the dead…
BTC, weekly – who says a bubble cannot be resurrected in two years time?
A Curious Development in Japan
For a long time Japanese stocks have been little more than a mirror image of the yen – they would rise when the yen lost ground and fall when it strengthened. This has changed rather noticeably of late as the chart below illustrates. Incidentally, the Nikkei has broken out over a resistance level that has held it back since early 2018. Whether this breakout will hold remains to be seen, but so far it certainly looks convincing (perhaps it will require a retest).
The Nikkei and the yen (weekly candles): in the middle of the chart the 60-period correlation between the two markets is shown (it ranges from “-1” for maximum negative to “+1” for maximum positive correlation). A strong negative correlation persisted for such a long time that it almost began to feel like a law of nature. Not anymore.
Printing Until the Cows Come Home…
It started out with Jay Powell planting a happy little money tree in 2019 to keep the repo market from suffering a terminal seizure. This essentially led to a restoration of the status quo ante “QT” (the mythical beast known as “quantitative tightening” that was briefly glimpsed in 2018/19). Thus the roach motel theory of QE was confirmed: once a central bank resorts to QE, a return to “standard monetary policy” becomes impossible. You can check in, but you can never leave.
Phase 1: Jay Powell plants a happy little money tree to rescue the repo market from itself (from: “The Joy of Printing”).
Everything and the Kitchen Sink
After the first inter-meeting rate cut in early March, we opined that further rate cuts were a near certainty and that “not-QE” would swiftly morph into “QE, next iteration” (see Rate Cutters Unanimous for the details). As it turned out, the monetary mandarins did not even wait for the official FOMC meeting before deciding to throw everything and the kitchen sink at the markets. Not only were rates insta-ZIRPed, but “not-QE” became “QE on steroids, plus”.
The federal debt monetization machinery goes into orbit. Moon landing next?
Easy Money Becomes Even Easier
Last week the FOMC surprised the markets with a rare inter-meeting rate cut. As the FOMC statement released on the occasion reveals, the decision to cut the federal funds rate by a hefty 50 basis points was unanimous. The much-lamented “zero bound” is coming closer rather quickly.
A happy little money tree… from “The Joy of Printing”
Containment Fail
We want to share a few observations about the growing COVID-19 epidemic, based on what we have seen so far. It has been obvious for a while now that the attempt to contain the spread of the virus has essentially failed. Ever since case numbers started to soar in South Korea, Italy and Iran, it was clear that hopes that the outbreak would remain confined to China were misplaced.
Doubleplus-ungood micro-organism COVID-19 looking for cells to infect
Market Drivers
The recent outbreak of a dangerous respiratory illness caused by a new Corona virus in China was widely blamed for the stock market sell-off on Monday last week. It is undoubtedly true that the epidemic has the potential to severely disrupt economic activity, although it is too early to come to a definitive conclusion about that. Be that as it may, the event actually serves as an excellent example illustrating that the news of the day are incidental to market action rather than causing it.
S&P 500 Index, 10-minute chart. A fairly strong sell-off on Monday last week, a vigorous rebound on Tuesday.
Disrupted Disruptor – Legal Setback Sweepstakes
It seems Uber just can’t catch a break these days. First its license to operate in London was revoked. At issue was apparently that 43 unlicensed drivers were able to take an estimated 14,000 “unauthorized trips” due to a flaw in the Uber app (note that 45,000 licensed Uber drivers are working in London) .
Uber’s service has become an important part of London’s transport infrastructure – and a thorn in the side of established taxi services. [PT]
Photo credit: uber.com