A tough day for equities as major indexes fell more than 1%. Yields also fell 5-8 bps as investors reassessed their risk appetites, or at least that sounds plausible.
Yesterday's ISM showed the service sector expanded for the 14th straight month with strength in activity and new orders and some softening in employment and prices. The softening seemed to dominate the market’s sentiment, despite the fact that comments that ISM highlighted from respondents read fairly optimistic.
Also weighing on risk appetite, apparently Apple and Tesla have sales problems in China. How much of that is economic weakness in China vs. consumer preferences being influenced by nationalism vs. increased domestic Chinese competition (I saw that 60 minutes on China's EV industry and their robotics a few weeks ago).
Crypto doesn't care about China (or maybe it does as it generally doesn't like authoritarian regimes and Chinese can use crypto to get wealth out of China). I've written about crypto lately, but a bit more quietly Gold has hit new record highs. Perhaps Bitcoin and Gold are driven by similar factors, both of which are driven by political economy questions. True Bitcoiners are libertarian and techy who want a way to make uncensored payments with some assurance that no one will hyperinflate away the digital coin (though while Bitcoin is fixed quantity, nothing stops the proliferation of a thousand other cryptocoins). Gold bugs generally believe that fiat currencies should be redeemable into a physical commodity, gold, which serves as a "medium of account" under a general premise that gold monetary units provide a more stable currency than fiat and are less prone to the political will to inflate (though a gold standard still requires political cooperation, especially if governments control the mints).
Speaking of gold and Bitcoin, Larry White of George Mason, was speaking about his book Better Money: Gold, Fiat, or Bitcoin? on MacroMusings back in August 2023 in his talk he mentioned the following as to why he believes Gold has characteristics that make it a better money than Bitcoin, specifically how gold supply expands as money demand grows, while Bitcoin supply does not:
That's the biggest point the book makes that in the long run, under a gold standard, the quantity of money grows as demand grows. And so you get this mean reverting characteristic that we talked about earlier where the purchasing power is pretty stable and predictable, not perfectly, but pretty stable and predictable, more stable and predictable than Bitcoin would be, more stable and predictable than fiat monies have turned out to be in practice.
...... But because the quantity of Bitcoin at any point in time is a vertical supply curve, over time, the supply curve shifts to the right slowly with the programmed increase in the supply, but the quantity doesn't respond at all to increases in the demand. All of the increase in demand goes into the price and none into the quantity. And so that makes it more volatile than a gold standard, both in the immediate run where the gold standard supply curve is not perfectly vertical, because you can convert non-monetary gold into monetary gold, but it's especially dramatically different in the long run where the supply curve for monetary gold is basically flat and the supply curve for Bitcoin is basically vertical, meaning you get a lot of volatility in the price and no volatility in the quantity. Whereas with a gold standard, it's the reverse. You get response in the quantity and stability in the purchasing power.
....So if fiat monies break down and people are looking for a better money, and to go back to the beginning of the book, as they had to do in Venezuela during the hyperinflation, it seems to me that gold is a better candidate. People would find it a better candidate.
On the day ahead it's ADP Employment, JOLTS, Beige Book and Day 1 of Powell.
XTOD: New Commentary The most important topic for Professional Investors is "The Cost of Carry" - what it costs to hold a position over time. Today I detail this concept in layman's terms for civilians.
https://convexitymaven.com/wp-content/uploads/2024/03/Convexity-Maven-The-Cost-of-Carry.pdf
XTOD: Is private equity actually worth it? https://t.co/kdAR1K89A8
XTOD: Berkshire Hathaway director Chris Davis on The Knowledge Project podcast:
"Berkshire is run with the idea, from the very beginning, that the people that were invested in Berkshire had 100% of their net worth in Berkshire.
That really does shape the culture there.
It's not that [Berkshire] is afraid of risk, but the sort of risks it takes are risks that are manageable on the income statement.
The idea of Berkshire really, really being built to last — that is profoundly true."
XTOD: When gold rises in your currency DESPITE positive real rates, the gold market is saying “Your government will have a debt spiral if real rates remain positive.”
Gold began warning of this in late 2022; numerous other markets have since begun playing by this "new set of rules."
XTOD: Janet Yellen gives an important update regarding crypto https://twitter.com/i/status/1764830154780717335
XTOD: Worth the read The Loser’s Game By Charles D Ellis https://twitter.com/F_Compounders/status/1765091631370248200/photo/3
https://x.com/ConvexityMaven/status/1765043963277488414?s=20
https://x.com/FTAlphaville/status/1764878754050941055?s=20
https://x.com/kejca/status/1765024508077805893?s=20
https://x.com/LukeGromen/status/1765015614374965372?s=20
https://x.com/kofinas/status/1765097353927594003?s=20
https://x.com/BaseballDudes48/status/1765105874765259000?s=20
No comments:
Post a Comment