Comment of the Day
Big Picture Long-Term video April 22nd 2022
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Pound Hits Lowest Since Lockdown on Signs U.K. Recovery Slows
This article from Bloomberg may be of interest to subscribers. Here is a section:
The readings will feed into debate about how quickly policy makers should move to calm inflation, which at 7% is more than triple the target. Investors anticipate another increase in interest rates next month, bringing the key lending rate to 1% for the first time since the global financial crisis more than a decade ago.
BOE policy maker Catherine Mann on Thursday raised the prospect of a bigger jump in interest rates to control inflation. She also said she’s focused on how well demand holds in determining how to vote in May.
She noted that data suggested “consumers were forward-looking, which would translate into a period of softer demand growth, perhaps even retrenchment.”
“Mann put the cat amongst the pigeons yesterday by suggesting the BOE could accelerate its pace of tightening if the economy withstood the cost of living crisis,” ING analysts wrote in a note. “Today’s soft U.K. March retail sales release is a notch against such an outcome.”
My view - The big question is whether the growth slowdown in the UK is a prelude to what we can expect from the rest of the world? My hunch is yes. The UK aggressively boosted money supply and debt issuance during the pandemic, was among the first to remove mask mandates, experienced a jump in activity immediately afterwards, and is now beginning to experience a hangover as the rising cost of all consumables bites into spending power.
Email of the day on commodity prices
if we are at peak inflation now, as some suggest, do you believe it's time up for the commodity trade? Freeport, Anglo, Alcoa (NYSE:AA) has vicious pull backs this week from highs, with some of those having key week reversals. If you've made money, take shelter and come back another day, or stick it out because the longer-term structural story is intact?
My view - Thank you for a topical question. The big question at present is whether we are in a cyclical or secular bull market for commodities and industrial resources in particular.
The cyclical argument runs that the current conditions are similar to the post credit crisis rebound. From early 2009 commodities rallied from depressed levels to new highs inside of three of years. Then monetary conditions tightened as balanced budget measures were imposed in both the USA and Europe. As monetary conditions tightened, and the Dollar strengthened, commodities peaked went through a crushing bear market for the next five years.
Stripe Teams Up With Twitter in Renewed Crypto Payments Push
This article from Bloomberg may be of interest to subscribers. Here is a section:
The move is the latest manifestation of Stripe’s renewed interest in crypto after rivals such as Block Inc (NYSE:SQ)., PayPal (NASDAQ:PYPL) Holdings Inc. and Checkout.com made inroads in the industry. Stripe suspended support for Bitcoin payments in 2018, but began recruiting crypto talent last year and in March said it was helping digital-asset exchanges FTX and Blockchain.com with online payments and customer verification.
Creators on Twitter will be able to receive payments initially in the stablecoin USD Coin. The payouts across the Stripe Connect platform will be made using Polygon, a blockchain network designed to make Ethereum faster and easier to use. Stripe said it chose Polygon because of its speed and low transaction fees.
My view - Distributed ledgers and trustless networks continue to gain traction in the financial services sector. The desire to track ownership and the origin of funds has probably increased with the sanctions levied on Russia which should be positive for blockchain-based payments systems. However, that doesn’t tend to have much influence on the trajectory of crypto assets.
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