Comment of the Day
Video commentary for February 15th 2022
Some of the topics discussed include: bitcoin leads rebound in stocks, gold and oil pause, China supplies additional stimulus, 10-year yields continues to rise which is a headwind to a bigger recovery.
PBOC Pumps in More Liquidity, Spurring Gains in Chinese Stocks
This article from Bloomberg may be of interest to subscribers. Here is a section:
The People’s Bank of China is catching its breath after it cut the one-year medium-term lending facility rate last month -- the pause won’t last long. The central bank has signaled it’s ready to deliver more support to prop up growth. We expect the next cut as soon as the second quarter, and see the PBOC delivering another one in 3Q -- part of a broader array of easing measures to counter the slowdown.--David Qu and Chang Shu, China economists
Despite the decision to hold the one-year policy loan rate steady Tuesday, the PBOC’s easing stance has set it apart from other major central banks including the Federal Reserve, which are tightening monetary policy to tame soaring inflation. The possibility that the Fed will accelerate the pace of rate hikes could restrict China’s room for further easing later this year as it could accelerate outflows.
Global demand for Chinese bonds has already slipped amid their shrinking yield premium. The yield gap on China’s 10-year sovereign bonds over similar-maturity Treasuries narrowed to 73 basis points last week, the least since 2019.
My view - China wishes to put an end to the pattern of booming asset prices every time it eases policy. The kneejerk reaction of Chinese investors has always been to rush into property when liquidity eases. It has been the best performing asset, but prices are now also very high and affordability is an issue.
Tech Questions for 2022
This article by Benedict Evans may be of interest to subscribers. I found the summary of the outlook for electric and autonomous vehicles to be about the best I’ve seen recently:
The car industry is shifting to electric, and that changes a lot of what a car is - there’s an order of magnitude fewer moving parts, a very different supplier base, and much of the sophistication moves to software. We go from complex cars with simple software to simple cars with complex software.
Seen from tech, this looks a lot like the smartphone take-over of mobile phones, and there’s a lot of pattern recognition, right down to the dumb old industrial companies that think software is easy and they can just hire some developers. But it’s not yet entirely clear whether this really is disruption. An electric car is a better car but an iPhone is not a better Blackberry (TSX:BB) - it’s an entirely different thing that happens to be roughly the same size. So how much does electric really rewrite car manufacturing? Bulls think Tesla is a software company (and lots of other things), but bears think that no, it’s still a car company.
Autonomy is potentially much more profound and disruptive, and really does change what a car is - a car with no steering wheel is not really a car anymore. That raises as many questions as cars themselves did (it was much easier to predict mass car-ownership than to predict Walmart), and the tech itself remains full of questions. Can Tesla boot-strap its way through to something that works well enough? Will Waymo get there first going top-down? Are there winner-takes-all effects?
But more importantly, we don’t know when, how or where any of this will work. There was a period of euphoria a few years ago when AVs looked imminent, but it may now be that autonomy is like the old joke that AI is anything that doesn’t work yet. ‘Full’ autonomy may be as many decades away as ‘general AI’ (indeed it might require general AI!) but we’ll get all sorts of much more limited automation in the meantime.
My view - The reason Tesla has achieved a $1 trillion valuation is because it is a favoured trading vehicle (pardon the pun) for options traders. That has created synthetic demand for the shares and supported the valuation. Nevertheless, promise of “full self-driving” keeps being pushed back. The company’s autonomy day was nearly 3 years ago.
Coinbase Swears This All Isn't Like the Dotcom Bubble After Super Bowl Ad SNAFU
Coinbase, in one ad named WAGMI (“we're all going to make it”), crafted an advertisement that bounced a QR code around the screen, changing colors each time it hit the edge like an old-school DVD menu. Scanning the QR code―which immediately forfeits your right to enter heaven―takes the user to this page, where Coinbase offers $15 in Bitcoin for signing up as well as a chance to enter a contest to win one of three prizes for $1 million worth of Bitcoin.
The linked webpage went down almost immediately thanks to the increased traffic from the ad, and ridicule at the idea of paying millions of dollars to send millions of viewers to a down site poured in from around the web. “Coinbase spending $16,000,000 on a Superbowl ad to direct people to their website and $0 to make sure that website doesn't crash 10 seconds after the ad starts is so very internet,” tweeted Edward Snowden amid the outage.
To Coinbase, though, the ad was a success. In a blog post congratulating itself on the advertisement and interviewing Coinbase Chief Marketing Officer Kate Rouch about why the ad was so good, the company revealed it saw "20M+ hits on our landing page in one minute" which "led to us temporarily throttling our systems." Chief executive Brian Armstrong took to Twitter to gloat about the ad: ranked #1 by AdWeek and peaking at #2 in the Apple App Store, just ahead of apps for the Pepsi Super Bowl Halftime Show and the NFL.
My view - The offer was still live today when I visited it and offers $15 in bitcoin for signing up. For anyone looking for why bitcoin popped on the upside yesterday, despite stocks falling, we don’t have to look much further than the Superbowl ad.
The Chart Seminar 2022
With global vaccination rates rising, the prospect of anti-COVID pills on the horizon and the promise of travel restrictions being dropped, it is time to start thinking about venues for The Chart Seminar in 2022.
Please drop sarah@fullertreacymoney.com a line if you would be interested in attending an event next year, as well as your preferred location.
At present I am looking at a late May date for a London seminar and I am open to other times and locations subject to demand.
Eoin's personal portfolio: short reopened February 2nd 2022
One of the questions subscribers as most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.