Comment of the Day
28th March 2023
Eoin Treacy
Mar 29
Video Commentary for March 28th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: dollar extends decline, oil rebounds, bitcoin holds breakout, bond yields steady, stocks ease, non-US markets fare better.
Logic, Magic, And the Outlook For Retail Stocks
This article from Barron’s may be of interest to subscribers. Here is a section:
Investors are worried about a potential recession, but you have said that discretionary retail spending is already in a recession. How do you expect it to unfold?
It seems that in the past few months, we've seen a consumer-discretionary recession. The consumer still has money, but you don't need a new big-screen TV if you bought one during the Covid pandemic, or new outerwear if you bought a new coat last year as people started going out again.
We are seeing consumers return to prepandemic behaviors -- things we were talking about 10 years ago, such as shopping close to need, shopping during events, looking for promotions. The problem, which has been consistent but sequentially improving, is that inventories can't adjust that fast. Also, when stimulus dollars were flowing, consumers weren't that price-sensitive because they had money in their pockets. Now the sensitivity has increased.
Is inflation now semipermanent?
I think so. Prices will stick, and there might be disinflation, but there won't be deflation. We are at a new level because of labor; we will see some relief in freight and the average unit cost of some ingredients, but labor costs will be sticky. Apparel has been problematic, because the price of shirts basically has stayed the same for a decade. A little bit of inflation is healthy, but this level has been wreaking havoc in demand trends. Your food cost at Walmart was up by a midteens percentage [in recent months]. That's a good indicator of how the whole country is faring.
Eoin Treacy's view
Penny pinching has arrived in the consumer sector and that is about the clearest sign of reduced spending power we can observe. Unemployment has not yet started to tick higher, so for now consumers do not have to make big spending adjustments. However, tightening monetary conditions continue to tighten the noose so caution is warranted.
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Sweden Wrestles With an Economic Crisis Built at Home
This article from Bloomberg may be of interest. Here is a section:
Sweden has long fallen short on its constitutional pledge to provide an affordable place to live for all of its 10.4 million people, but until recently that was masked by the growing economy which had helped disguise flaws in the system.
The shortage of affordable accommodation is hitting recruitment. The Stockholm Chamber of Commerce reported last year that three out of four heads of human resources said the housing situation was making it harder for their firms to hire new staff.
Rents are negotiated annually by landlords and the tenants association. Advocates say the system helps create a rental market in Stockholm where teachers, police officers, street cleaners and other public sector workers can afford to live alongside bankers, software developers and government officials. Yet supply hasn’t kept up with demand for decades. Average waiting times for a rent-controlled apartment is now 9.2 years, but can stretch up to 20 years in some parts of the capital.
Eoin Treacy's view
Socialism’s only hope of functioning is to ensure the cost of living never rises. That means creating a social contract where the only means of generating personal wealth is through ingenuity and productivity. It’s a high bar and apparently unachievable for long.
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Santander launches a blockchain-based foreign exchange service that uses Ripple's technology
This article from CNBC may be of interest. Here is section:
Santander’s blockchain-powered foreign exchange platform is currently live in four different countries — Spain, the U.K., Brazil and Poland. A wider roll-out is expected in coming months, the bank said.
Innoventures, a $200 million fintech, or financial technology, venture capital fund set up by Santander, was one of a number of investors to participate in Ripple’s first round of funding in 2015.
Ripple has struck partnerships with multiple banks and other financial institutions, including Santander. Banks are less keen to use the firm’s digital currency XRP, but earlier this year two money transfer firms, MoneyGram and Western Union, announced projects involving the cryptocurrency.
On Wednesday, Ripple invested $25 million into a fund started by Blockchain Capital, a venture capital firm dedicated to blockchain.
Eoin Treacy's view
Ripple first gained notoriety as the favoured token of banks but nothing much came of the initial enthusiasm. Ethereum later became the favoured vehicle and went on to have a significant bull trend.
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Eoin' personal portfolio: commodity short initiated March 23rd 2023
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
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© 2023 Eoin Treacy
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