Comment of the Day
Video commentary for July 13th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: CPI surprises on the upside and investors price in another big rate hike but bonds rallied and stocks steadied. Willingness to look through trouble and buy the dip has been the hallmark of this bull market but corporate profits are peaking, unemployment is about to rise and we have not felt the ill effects of a recession yet.
Email of the day on beneficiaries from a recession:
Your daily talks, now focusing on the probability of a recession, are as always full of interest. I never miss them, or if I have to, I at least read the Comments of the Day.
I've been struggling to decide on some "investments" that could profit from the recession scenario, and which could remain there for the medium term, without my having to watch them every day for sudden reversals. Any suggestions? Shorting a commodity ETF? Shorting the US banking sector? I'm sure you have other ideas.
My view - Thank you for this long-term patronage and this question which may be of interest the other subscribers. The phrases “buy and forget” and “shorting” don’t normally go together. Shorting necessarily means leverage. You can’t walk away from a leveraged position because they can go against you in a hurry.
Will release of $3B Bitcoin from Mt Gox cause market bottom in August?
This article from cryptoslate.com may be of interest to subscribers. Here is a section:
Should the release of the remaining Mt Gox funds have a similar effect on the price of Bitcoin, it would likely drop below $10,000. However, even in recent months, there has been equal sell pressure on Bitcoin from parties such as Luna Foundation Guard, Three Arrows Capital, and Bitcoin miners.
LFG sold several billion dollars worth of Bitcoin, which had a negligible effect on Bitcoin as the market absorbed the selling pressure. The following weeks since the event did result in Bitcoin’s price decline due to a change in market belief and overall global outlook. The markets may well absorb any selling from Mt. Gox creditors, but the social sentiment of early Bitcoiners relinquishing their coins could create a bearish psychological sentiment.
My view - Bitcoin is a liquidity barometer. The Mt.Gox liquidator releasing additional supply into the market would be a headwind at the best of times. Doing so while interest rates are rising and liquidity is being siphoned out of the system, will only have a larger negative impact on bitcoin prices.
Chinese Homebuyers Across 22 Cities Refuse to Pay Mortgages
This article from Bloomberg may be of interest to subscribers. Here is a section:
The payment refusals underscore how the storm engulfing China’s property sector is now affecting the country’s middle class, posing a threat to social stability. Chinese banks already grappling with challenges from liquidity stress among developers now also have to brace for homebuyer defaults.
Now is “a critical time for social stability,” said Chan, adding that “the forgoing of down payments may bring social instability.”
A drop in home values hasn’t helped. Average selling prices of properties in nearby projects in 2022 were on average 15% lower than purchase costs in the past three years, according to Citigroup’s research.
My view - How much do prices have to fall before consumers give up hope they will ever recoup their down payment through a sale? I guess we have the answer in China where many of the home purchases are speculative to begin with and tens of millions of apartments stand vacant at the best of times.