Free Bird
Crypto is in the zone. Whatever you find to be the major causation, it just seems to be working. If you're in the inflation or positive regulatory environment camp, the crypto markets are on fire. Bitcoin just missed topping the $100k mark last week. One more bit of positive news was that Gary Gensler would leave the SEC after the administration change. He's been know to be a bit of a bear for crypto. That's where my title comes from. There are two points of view on that. First, it seems like Bitcoin might be free to fly with an administration in favor and possible inflation. Second, Mr. Gensler will finally be free of all the non-sense. I picture Gary leaving in January singing Free Bird, "If I leave here tomorrow, Would you still remember me? For I must be traveling on, now, Cause there's too many places I've got to see. But if I stay here with you, girl Things just couldn't be the same. Cause I'm as free as a bird now, and this bird you cannot change."
There's a ton of momentum in the space, but James Bianco questions what inflation looks like and if the Nasdaq breaks correlation, if this Bitcoin runs continues all the way to $1M.
Markets continue to be divided. Asset managers are opening more long positions, even with a recent drop, and leverage funds are short. I think this is likely just a hedge as we hit these new highs.
Even with these atmospheric levels, Bitcoin Magazine thinks there is plenty of upside remaining after going through some of the on-chain data. My favorite chart in this article shows the long terms holders. People are just not selling, which means new buyers are going to have to pay up to increase that interest. I'll cover more crypto below.
President-elect Trump continues to release details about his cabinet and it's starting to move pockets of the market. The current administration continues to try to make an impact, as the Justice Department was calling for some breakup of Google and still lending some aid to Ukraine. The second one is one risk as Russian President Putin announced testing of new ballistic missiles and has threatened the West in aiding strikes into Russia. This scares me a bit.
Inflation continues to be hot and cold with some measures still concerning and some showing cooling off. The PCE coming in this week should provide a bit more info on this front. This has also impacted the Dollar, which is impacting Gold, Oil, and other assets.
Best of the Week
This is a bit long, but a very good discussion on the impacts or lack their of from an increase in passive investing. Michael Green is on the team that the rise in passive has distorted markets and could leave to further increases in valuations and reducing price elasticity. Randolph Cohen counters Mike's opinions saying that there's a lack of strong evidence and he doesn't really see this as a problem yet. I loved this one, because both gentlemen respected the other's views while completely disagreeing with one another. This is what civil discourse is all about. There's a discussion around what "passive" is. Things like sector ETFs are hard to classify as passive. Yes, they're following an index of stocks, but these are smaller niche sections of the market to be using in an asset allocation strategy. They also debated the impact of target-date funds and how the 401K options are mainly into passive vehicles. Listening time: 118 minutes
Best of the Rest
Continuing on the index conversation this is a replay from TD Securities' Portfolio Management and Market Structure Conference hosted by Peter Haynes . On this panel, we had representatives from the Big 3 index providers, FTSE Russell, An LSEG Business , MSCI Inc. , and S&P Dow Jones Indices , along with Vanguard 's Michael Perre . They start off the conversation with the question around the crowding of index trades. This part of the conversation continues on the above conversation with Mike & Randolph. Michael brought some heat saying that trading is a subtractor to value. He notes that the Vanguard total market fund, which has north of 4,000 securities, has turnover of less than 10%. Peter then asked my colleague, Catherine Yoshimoto , about Russell moving to a higher frequency rebalance for their indices. Catherine notes that it's under consideration, and Mike's opined that was more is better. There's also a discussion around company domicile issues with many listing in the US to take advantage of the large US index market. There's also some discussion around float and voting shares for index providers. I enjoyed the conversation around some of the nuances around index mistakes and some of the index provider differences like South Korea being EM for MSCI and Developed for FTSE. A question from the crowd came in to ask is indexing is a crowded trade. Another point that goes back to the podcast above. John Bogle thought 75% indexation is where things start to become difficult. Mike noted that higher index ownership doesn't mean better performance and only 5% of trading is from index flows. Certain events do creep up to move markets, but right now index trades are not a huge issue, at least according to this panel. The final part of the conversation goes through RIC rules, and I don't mean Reuters Instrument Code. We're talking Regulated Investment Companies that impact capping of weights to 25% of an index and those with higher than 5% weight do not equal more than 50%. Essentially looking to help limit things like the Mag7 becoming a huge part of any index. Listening time: 59 minutes
I thought this one was a good explanation from Mark Cabana, CFA , BofA's Head of Rates Strategy, on how rates might respond to the incoming policies by the Trump administration. Mark says that the policies create possibilities that rates can go in either direction. Tariffs and immigration policies tend to indicate rising rates, while a new fiscal discipline, supply & demand around commodities, increased bank regulations, and possibility slower growth could lead to lower rates. There's more indication of rates moving more in the forward part of the curve rather than out on the curve. Mark mentions a chart looking at the 10Y vs. the Beige book wording. I found the chart below via this post on X. Listening time: 25 minutes
Recommended by LinkedIn
Looping back to the crypto conversation. A trader, well more like bettor, put down $16.20 on a Solana meme coin and in 10 days turned it into $3M. Peanut the Squirrel meme coin was the wild bet, and I thought my 10 leg parlay on TD scores was reckless. Well, this coin went from a market cap of $10,000 to $2Billion!!! This story is wild as it centers around a squirrel that was kept as a pet, seized by NY authorities, and euthanized. Of course Elon and even President-elect Trump were commenting on it. Now, every memo coin trader is going to think they have a chance.
In an interview at the Oxford Union last week, Ken Griffin said the chapter of expansion around multi-strat hedge fund has "come and gone." The article notes that Multi-strategy fund assets have come in a bit. declining to $366bn. According to GS, this is the first drop since 2016. These assets have been on a hot streak since 2017, increasing from $134bn.
One for the Road
This is a good one. It summarizes the role undersea cables play in connecting global internet traffic. This is something Pippa Malmgren has talked about in the next version of war. These cables are critical infrastructure and are hard to maintain and protect. These come along way from Paul Julius Reuter sending carrier pigeons to beat the stock news.
Thought it's a short week in the US, there is a ton on the docket. Fed minutes and US PCE on the Economic news. Equities has earnings from Dell, Crowd Strike, and Analog Devices, plus a big IPO from Pony AI.
Thanks for reading. I hope you all my American readers have a safe and Happy Thanksgiving.