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May 18 / 2020

Warren Buffett dumps Goldman Sachs holdings

 

(Reuters) - Warren Buffett's Berkshire Hathaway Inc, said on Friday it has sold much of its stake in Goldman Sachs Group Inc. Its Goldman stake fell 84% to 1.9 million shares, from 12 million at year-end

"If problems become severe enough in an economy, even strong banks can be under a lot of stress”

Berkshire also sold its entire stakes in the four largest U.S. airlines: American, Delta, Southwest and United earlier this month.

J.C. Penney filed for bankruptcy on Friday

The coronavirus pandemic has pushed troubled department store chain J.C. Penney into Chapter 11 bankruptcy. It is the fourth major retailer to meet that fate. It operates 850 stores and it has nearly 90,000 workers. It said that it received $900 million in financing to help it operate during the restructuring.

Powell testimony, FOMC minutes

 

The Fed chairman is to testify on Tuesday before the Senate Banking Committee alongside Treasury Secretary Steven Mnuchin to update government officials on the economic stimulus programs approved so far.

 

On Wednesday, the Fed is to publish the FOMC minutes of it is April meeting. In its rate statement last month, the Fed said it will keep interest rates at near-zero until officials are “confident that the economy has weathered recent events.”

Economic data

In the U.S., the main datapoint continues to be the weekly report on initial jobless claims. With the reopening of the economy gaining momentum economists are hoping for a reading of below 2.5 million, which would indicate that the rate of layoffs is slowing somewhat.

What do these mean

The coronavirus pandemic has caused major economic havoc globally. Most industries that rely on human traffic are badly affected, such as hospitality, tourism, retail and airlines. Even banks are not spared as non performing loans spiked in the last few months, causing write downs in loans by banks, affecting their profitability.

 

How does these affect me

Federal Reserve Chairman said the U.S. economy could face an "extended period" of weak growth, warning "deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy."

 

As the coronavirus continues to takes its toll on the U.S. economy, further damage to the economy or stock market may push the Federal Reserve to reconsider taking rates into negative territory.

 

If interest rates turn negative, your savings deposits will not earn interests. Stock markets will fall further as the economy continues to be weak. You may want to diversify into other asset classes that are not affected by the stock markets or interest rates. Gold, silver and cryptocurrencies are the possible alternatives.

Retail earnings



 


This week will see results from big U.S. retailers including Walmart, Home Depot, Lowe's, Target, Kohl's and Best Buy. Their figures will show whether U.S. consumers are still spending money despite the widespread coronavirus lockdowns.

The coronavirus pandemic has benefited online shopping giant Amazon. Its shares have soared some 28% this year.
 

Oil Price

The monthly expiration of U.S. West Texas Intermediate crude futures contract is coming up on Tuesday and many energy traders are worried about a repeat performance of the oil price slump last month which saw prices drop into negative territory for the first time ever.

 

The U.S. Commodities Futures Trading Commission has warned market participants they should be prepared for volatility and negative pricing again, with oil storage still tight and the demand outlook still severely depressed.

May 18 / 2020

Crypto Assets

Importance of narratives for Bitcoin’s long-term growth

After not having fully fulfilled its promise of emerging as a peer-to-peer electronic cash system, Bitcoin has moved on to other avenues. After a decade long existence, many are convinced that Bitcoin is best suited as a long-term investment tool or as a store a value with scarcity properties that mimic the likes of precious monetary metals like gold. This narrative has also boosted Bitcoin’s popularity among institutional investors, with the same being given more emphasis following the 11 May halving event

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Key points

  • The latest episode of the Unqualified Opinions podcast, Charlie Shrem spoke about Bitcoin’s value proposition as a store of value. He quoted:

  • “Bitcoin is built to appreciate, or I feel it’ll have to die if it doesn’t continue to appreciate. And obviously not as fast. It can continue to appreciate slowly over time, as we saw over the years. But the value of Bitcoin, at least the value of Bitcoin to other things, has to continue.”

Market Risks

Overview

Importance of nerratives. There are things that are affecting the markets. Narratives. Whole Blockchain  industry is one big narrative. Everything we started since 2010 was with a narrative.

Trend

Bitcoin is built to appreciate, or I feel it’ll have to die if it doesn’t continue to appreciate. And obviously not as fast. It can continue to appreciate slowly over time, as we saw over the years. But the value of Bitcoin, at least the value of Bitcoin to other things, has to continue.

Economic impact

According most analysis, 2020, we are going to see a huge consolidation. And whether that is over the next few months, ,the price would very likely to double, we don’t realize is that for miners price has to continue to grow very quickly to continue making the same amount of money they made before every day.

Your opportunity 

A go-to analysis model that Bitcoiners have cited continues to be the stock-to-flow model, and when Bitcoin’s past halvings and its most recent one are considered, it can be seen that the model still holds a lot of credibility and influence in the ecosystem.

Federal Reserve will continue to expand its fiscal stimulus to local economy, in order to prevent Wall Street to crush. In this matter , this will lead to inflationary environment 

We are witnessing the Great Monetary Inflation — an unprecedented expansion of every form of money unlike anything the developed world has ever seen. The best profit-maximizing strategy is to own the fastest horse. If I am forced to forecast, my bet is it will be Bitcoin.

April 24, 2020

China News

by Manbo Jumbo

Demand for consumer loans is picking up in China, especially among the less affluent, highlighting a group that some say could use more support during the coronavirus-induced economic downturn. 

The disease, officially called Covid-19, emerged late last year in the Chinese city of Wuhan. The virus has since spread rapidly around the world, killing more than 183,000 people, including over 4,600 in China.

While the coronavirus’ outbreak has stalled within the country, China is still trying to recover from the economic shock of weeks-long shutdowns, both domestically and now from export destinations.

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New consumer level  lows, China job prospects decline 

Key points

  • The economic pressure of the coronavirus has led to a greater demand for loans, although it’s less clear whether people can actually get them. And if they do, some analysts note risk levels will increase.

  • Given the scale of unmet needs, more economists are calling for a targeted cash payout to poorer households.

  • If consumption does not recover soon, some analysts expect more struggling small businesses will go under, leading to job losses.

Market Risks

Overview

Short term deflation will keep most of the stocks at lower price. Only selected sectors of the economy will be able to recover faster compare to majority of the market.  

Focus

Commercial and residential property market will also be under pressure until end of 2020 and this will open opportunities in the sector, before liquidity back on the market. 

Timing

Second wave of COVID 19, will additionally damage business environment. Overextended PBOC monetary policy might drive deflationary environment into inflationary stance. Recovering of major import countries will also impact China exporting sectors.

Economic impact

 Consumption in China could drop 11% this year if the central government doesn’t step up economic stimulus.Due lower consumer levels and limited access to reliable funding  for small business could face  difficult future. This will force many unsustainable business to close down or reduce their market exposure. In the mid term, we would probably witness major deflationary trend.

In a long term, that will probably keep deposit interest rates low and access to fresh capital limited, due higher bank requirements.     

Your opportunity 

  After COVID 19 Investment Opportunities will  be focused on fast recovering sectors as Digital Payments and  Fintech startups, are one of the major priority of Chinese government. Digital Yuan, blockchain infrastructure and unified business models are sectors to closely follow. Companies like Thinkey / smart cities tokenization / , VeChain / Supply chain solutions / would be reasonable choice in a long run. 
  The  other opportunity lays in the area of small and medium projects with good potential, but lack of financing. This types of investments are characterized with higher Profit/Risk ratio  and it will require professional due diligence before moving forward. 

Metapyr value

Visit our Macro fundamentals courses in order to learn how different asset classes perform during deflation economic times and which sectors are more likely to recover faster.  

In this Specialization learners will develop foundational Data Science skills to prepare them for a career or further learning that involves more advanced topics in Data Science

Macro economy fundamentals 

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