What happens after Bitcoin becomes mainstream?
Many will soon get involved, it’s your choice to be early or late.
For our loyal readers, the news of the imminent listing of a Bitcoin futures ETF (Exchange Traded Fund) on the US stock exchange will not come as a surprise. This is yet another inevitable step in the path of Bitcoin becoming a mainstream investment.
With BTC now becoming accessible to the everyday investor, the other cryptocurrencies will soon follow. ETH will be next and the growth of Decentralised Finance (DeFi) apps will explode.
Many will soon get involved, it’s your choice to be early or late.
Why Asset Prices will grind higher in the months and possibly years ahead
Although there are ongoing attempts made to reshore supply chains from China, most of the manufacturing facilities of the world still reside in China and the reshoring effort will take time. As a result, the shutdown of factories arising from the electricity supply crunch will have a butterfly effect on the rest of the world in terms of inflation.
Reshoring, on the other hand, will continue to drive prices higher in the future as well.Typically, the manufacturing is brought back to economies with a higher wage level. As a result of higher costs, there will be pressure for manufacturers to increase the prices for their goods as well.
Fiat currencies are and have been a bad place to be invested in for quite some time now. This will continue to be so as forces of inflation continue to push prices higher. Stay invested in risk assets as they are the best protection against inflation for now.
RBA monetary policy meeting minutes will be released on Tuesday which may include details for the rate hike timeline. RBA Governor Lowe speaks on Friday. Canada and the UK will release their CPI numbers on Wednesday. The 2 nations along with the Eurozone will be releasing PMIs data on Friday which will serve as an indicator of the current economic health amidst this energy shortage.
Keep short USD and long NZD, & CNH. USD remains on the defensive. Stay short.
2. Commodities: Uranium & Energy — Stay invested.
Key risks: Higher US bond yields, and Fedspeakers’ thoughts on the tapering process
Equity Index: Long Nasdaq futures. It’s starting to look like we are going to test new highs. Stay long.
Single Stocks: Despite the broad market being lower in recent weeks, some of the stocks in TrackRecord Model Portfolio are making new all-time highs. Get involved and stay involved. `
Key risks : Higher US bond yields, and Fedspeakers on the tapering process in the days ahead
WHAT HAPPENED YESTERDAY
- September US Retail sales rose +0.7% month-on-month, versus expectations of a -0.2% decline, helped in part by higher prices. The strength in consumer spending boosted risk sentiment for the day.
- The Dollar edged lower against a basket of major currencies on Friday, on track to end its five-week winning streak, as global risk appetite rebounded, helping reduce demand for the safe-haven currency.
- US 10-year Treasury Note yield rose 7 basis points to 1.59%, 2-yr yield rose 5 basis points to 0.41%.
- Stocks surged globally on Friday in their best day in five months as strong U.S. corporate earnings reports fuelled optimism about the economy, though three-year-high oil prices kept inflation risks alive and lifted government bond yields. The Dow Jones Industrial Average jumped +1.1% in its best weekly performance since June 25. The S&P 500 climbed +0.75% and the Nasdaq added +0.63%.
HEADLINES & MARKET IMPACT
Notable Snippet: The plan to roll out Merck & Co’s (MRK.N) promising antiviral pill to treat COVID-19 risks repeating the inequities of vaccine distribution, potentially leaving the nations with the greatest need once again at the back of the line, international health groups say.
For example, only about 5% of Africa’s population is immunized, creating an urgent need for therapeutics that could keep people out of hospitals. That compares with more than a 70% inoculation rate in most wealthy nations.
THEMATIC CONTEXT: “We believe that once India recovers and resumes its growth trajectory, their demand for energy will be insatiable and this will put much more pressure on the already acute situation of a traditional energy supply deficit. We believe that we will see much higher prices in Oil, Natural Gas and Coal.” — 1st June 2021
COMMENTS/IMPACT: Once the efficacy is proven and more countries get their hands on Covid treatments, we believe this will lead to more economies reopening fully and put more pressure on the inflation front. As mentioned, we believe that absolute inflation will be much higher this decade and that commodities and equities will significantly outperform cash.
Notable Snippet: China’s energy crisis deepened on Friday as cold weather swept into much of the country and power plants scrambled to stock up on coal, sending prices of the fuel to record highs.
Electricity demand to heat homes and offices is expected to soar this week as strong cold winds move down from northern China. Forecasters predict average temperatures in some central and eastern regions could fall by as much as 16 degrees Celsius in the next 2–3 days.
THEMATIC CONTEXT: “This is the real elephant in the room for China, a power supply crunch will have a material impact on GDP and growth on China as opposed to the Evergrande situation and we should be alert to the developing situation. We have been heavily positioned in energy and warning about this acute problem since 2020, it seems that things are playing out as projected. Hold onto your hats as traditional energy will be back in vogue.” — 28th Sept 2021
COMMENTS/IMPACT: 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.
Notable Snippet: Waving signs like “coercion is not consent,” and “stop the mandate,” some 200 Boeing Co (BA.N) employees and others staged a protest on Friday over the planemaker’s COVID-19 vaccine requirement for U.S. workers. Boeing said on Tuesday it will require its 125,000 U.S. employees to be vaccinated by Dec. 8 under an executive order issued by President Joe Biden for federal contractors.
COMMENTS/IMPACT: We suspect that Biden’s vaccine mandate will put a dent in US jobs recovery growth as the country is polarized over vaccine politics and believe that many will either voluntarily quit or be fired from their jobs. The result will be a goldilocks economy that forces the hand of the FED and Government to print and support easier monetary policies. Stay invested.
Phan Vee Leung
CIO & Founder, TrackRecord