Morning Update: Mon 20th March
Tell me you don't wanna buy CS without telling me you don't wanna buy CS
The information in this message does not represent any financial or investment advice. They're just random thoughts in my head.
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MACRO - Well well well, what a weekend. It turns out Credit Suisse was truly fucked and thus Swiss regulators brokered a deal for UBS to buy CS for SFr3bn, about a 60% discount from where shares closed on Friday. In a nutshell, this is "good" because CS is "saved", but this is "bad" because it makes you realise how bad things must be for regulators to have to step in and basically strong-arm UBS into buying CS. Pretty insane. Futures initially rallied on the news but are now back to unchanged. UBS stock is down about 9% having initially fell 15%. We've seen a monster rally in interest rates once again which puts 2Y back to 3.7% and 10y back to 3.3%. This now puts the probability of a Fed hike this week at roughly 50-50. I'll repeat what I said last week in that I think the Fed is better off pausing here and buying themselves some time. Another possible outcome is they proceed with a 25bp hike but have a very dovish press conference. Remember, the Fed wants market stability, the last thing they want is to increase chaos in what is a fragile moment for the banking industry. I am viewing the FOMC as most likely a bullish event for markets here.
CRYPTO - If you told me 2 weeks ago, everything that would happen in the world, I'd tell you ETH would be at 1K as a result. So it's rather surprising to see both BTC and ETH hit new ATHs over the weekend, although they've since settled back down to 28.2K and 1780 respectively, with BTC still outperforming everything except SOL which is randomly rallying today. At this point in time, I thank myself for always having a big spot long in crypto. It's as basic as ETH is still down 64% from ATHs and you just have to strip yourself of your recency bias to understand it's still a very compelling trade here, despite everything that's happening. And guess what, sometimes a narrative that you assigned a low probability to happens and if you sold it all or shorted you're stuck thinking damn I just missed a 30% move and IDK wtf to do here because I don't want to chase/FOMO. Remember, the market is never wrong, it's your job to predict the results the market produces, and right now, the strongest narrative is that all this is good for crypto, and tbh it is. You have a holy trinity of banks failing, Fed pausing/pivoting and resulting high inflation in the US...this is arguably an even more powerful narrative for crypto than what we saw in 2021. The other side of the coin is if you have a big sell off in risk assets, then crypto will naturally get hit, but this is why the Fed is so important. You already saw headlines over the weekend about global central banks extending USD swap liquidity - never in the last decade have we seen central banks just let things fail and I think this will be no different, it will just be at the cost of having persistent inflation which will be good for crypto in an environment where the Fed is not raising rates, and possibly lowering them. Tread with caution, because things will be volatile, but I think this explains crypto's performance, and in particular bitcoin's dominance. I'm bullish here.
NFTs - $80m of volumes in the last 24H which saw Blur maintain a 67% market share. Prices are mixed but seem to continue to trend lower, notably with BAYC dropping back to a 62E floor. There's been a lot of volume in Punks which now sit at a floor of 75E (this is due to wrapped punks being added to Blur and a significant uptick in volume). Punks have been very quiet for a long time and while I love that they are up having recently acquired one, I do think the main reason is liquidity and farming on Blur. With the narratives I've mentioned above though, people want "stores of value" and I think true blue-chip art is where you wanna be in NFTs.
GL this week.