If you ask Elon Musk, man whose company bought $1.5 billion worth of Bitcoin for its balance sheet, Bitcoin prices “seem high.”
I suppose he can afford to make those kinds of statements. One assumes he’s playing with the house’s money — for now anyway. After all, Bitcoin is up sharply this year, and anyone who’s been along for the ride can certainly afford to give some back and still be sitting on a hefty gain.
Still, if I were a Tesla shareholder (and I suppose we all are now) I’d be a bit irritable that Musk is already doing precisely what some feared he might: Jawboning Tesla’s “cash” pile on Twitter, in this case lower. Bitcoin dropped as much as 18% Monday, before recovering. Although the plunge was attributed in part to Musk, the demonstrable gap between his weekend tweet and the worst of the declines suggests otherwise.
You might be inclined to cite Janet Yellen instead, whose comments on Bitcoin closely coincided with the drop. “To the extent it’s used I fear it’s often for illicit finance,” she said, during a New York Times virtual event. “It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering,” Yellen added. I imagine that elicited all manner of derision from the crypto social media crowd.
That was “a story” on Monday, which speaks to a rather unfortunate reality. Bitcoin has replaced Donald Trump in the financial news cycle. Like Trump, it does something at least once per day that counts as “news.” You can’t not mention it. If you try to ignore it, it shouts at you, figuratively. The only difference is that Trump’s shouting was literal.
Yellen also weighed in on taxes and ultra-long issuance during the same event. It was just the party line. Joe Biden doesn’t favor a wealth tax, although it’s been discussed. Corporate taxes might need to go up. The same for capital gains taxes. A financial-transactions tax is worth exploring but she’d need to “examine” it “closely.” Yellen used a lot of guarded language. Lots of things are “worth considering,” which is the opposite of “imminent.” If you’re someone who was terrified of higher taxes under Democratic government, this is why you wanted Yellen running the show. She, better than perhaps anyone on the planet save Mario Draghi, knows how to open her mouth without upsetting markets. Outside of Bitcoin, it wasn’t clear her remarks had any impact. She reiterated that bigger is better when it comes to stimulus, which, again, is just the party line.
Speaking of the party line, the House Budget Committee advanced Biden’s stimulus proposal Monday on a 19-16 vote. Democrats are trying to get ahead of a looming deadline next month, when key virus relief and other benefits will expire. The House wants a floor vote by Friday. The Senate could vote as soon as next week, apparently.
Tech shares were demonstrable laggards in the US to start the week. That’s no surprise. Anything that prospered during the yearslong “duration infatuation” is now in peril.
Conversely, energy and bank shares are beneficiaries of the reflation zeitgeist. The 5s30s was the widest since 2014 and crude continued its trek higher, with Morgan Stanley joining Goldman in hiking Brent forecasts. “The stars have aligned for the oil market even faster than expected,” the bank said. WTI passed $61.
Again, bank and energy names are starting to look quite perky.
You’re likely to keep seeing this daily tug of war, where the market tries to navigate a brave (or maybe not-so-brave, depending) new world in which gains for cyclicals and value attempt to offset weakness in secular growth. Those are some big shoes to fill.
The rates selloff showed some sings of exhaustion, but Treasurys bear steepened nevertheless. Yields were cheaper by more than 4bps out the curve. “The Treasury market is trending at the moment as modestly higher yields appear to be the path of least resistance,” BMO’s US rates team said, adding that “investors are awaiting an inflection point with an eye on convexity flows as the next potential trigger.”
Notably, short interest in TLT is the highest since 2018 (h/t Katie Greifeld).
Meanwhile, Boris Johnson outlined a plan for the UK to return to a semblance of normalcy — in stages.
While some businesses in the UK will remain closed until the summer, he said the country is on a “one-way road to freedom.”
“We cannot persist indefinitely with restrictions that debilitate our economy, our physical and mental well-being, and the life chances of our children,” Boris told parliament. That, he said, is why it’s “so crucial that this roadmap is cautious but also irreversible.”