Look Past the Dumb Crypto Headlines — U.S. Economic Conditions are Still Improving
I swear, if I see another Bitcoin headline tomorrow, I’m going to scream.
After receiving incessant “crypto crash” alerts all day, the last headline Bloomberg emailed me yesterday was this…
Source: Bloomberg
Bitcoin rises again. Seriously?!?
Other than perhaps Peter Schiff, are there people out there who really think that it was never going up again?
We certainly didn’t.
In fact, in Tuesday’s Venture Society, I specifically said “admittedly, after his tweet, Bitcoin’s price chart doesn’t look so great. But even after all this past month’s bearish action, the long-term positive trend won’t officially end until prices get down to about $30,000.”
Well, look where it bounced… Right on the damn screws, as us old baseball players say, at $30,016!
Source: Bloomberg
I mean… I just can’t do much better than that, folks.
But what this means, for better or worse, is that Bitcoin’s bullish trend remains intact.
And that’s consistent with our view that commodity prices — and yes, all you HODLers, Bitcoin is a commodity — will continue to inflate into summer.
Now, do I want to buy it here? Absolutely not.
If you buy one, you buy Ethereum here, as it has a superior-looking chart.
Source: Bloomberg
But frankly, I’m fine avoiding both and using their relative levels and trends to either confirm or contradict our view that commodities remain on the rise.
I also mentioned on Tuesday that if we saw the industrial metals — copper, iron ore and steel — correct, then we would proceed with caution.
So far, we have seen two of the three, but the corrections are comparatively small.
Source: Bloomberg
In fact, I tentatively like buying copper and oil here, as this week’s action has been driven primarily by the fact the market is already incredibly long. So, in order to buy something new, portfolio managers (PMs) will have to sell something.
Source: Bloomberg
In addition, there have clearly been performance issues at hedge funds this year, as the dumb old S&P 500 has outperformed the HFRX Hedge Fund Index YTD by nearly four times.
Source: Bloomberg
When P.M.s underperform consistently, they get fired. When they get fired, all assets under management get dumped. And when the hedge fund industry is aware of performance problems like those, they are obligated to hedge at any sign of volatility.
In fact, we could see that this morning, with the put/call ratio at its highest level since October.
Source: Bloomberg
Notice they were hedging at the bottom then, too.
Now, I’m not saying that the market isn’t overvalued, per se. I’m saying that value is relative, and the market has been a sight better than a savings account, for instance.
But the sell-offs this week haven’t even been able to push the VIX or Nasdaq volatility (VXN) past the highs of the last sell-off.
Source: Bloomberg
Say what you will about that, but to me, that means we buy the damn dip.
Even judging by Thursday’s employment data alone, it’s clear that although we might not get back to 2019 highs for a good long while, conditions are improving.
Employment Data Makes Some Progress
Initial unemployment claims fell by 29,000 to a new pandemic low at 444,000.
Source: Bloomberg
Yes, that’s still nearly half a million people, but it’s moving in the right direction.
And although continuing claims were elevated over expectations, total persons collecting unemployment fell to a new pandemic low of 15.9 million people.
Source: Bloomberg
Still a terrible absolute number, but we like to see new lows paired with a clear downtrend.
Moreover, given that a few states are ending unemployment benefits as soon as June 12, we may even see this top-line number plummet through the GFC peak…
And into more “historically normal” terrible numbers.
So, yes, I think if copper is lower tomorrow, buying a little one-eighth tranche in Ivanhoe Mines (OTC:IVPAF), some Freeport-McMoRan Inc. (NYSE:FCX) and the United States Copper Fund (NYSEArca:CPER) isn’t a bad idea.
Inflation hasn’t gone away yet… It’s just taking a breather.
All the best,
Matt Warder
