The tide has gone out; Tech companies, SPACs, Cryptos
Macro Perspectives
The betting markets had priced in a 70%+ chance of a Republican sweep as we entered the midterm elections. That has now become a 70%+ chance of a divided Congress.
On its face, that should be good for stability (some needed predictability), as it is assumed that a Republican House would block any new agenda items from the Democrats.
Let's talk about cryptocurrencies…
There were rumors on Monday that a major cryptocurrency exchange, FTX, was in trouble. This was the response from the billionaire founder ...
Forty-eight hours later, it's insolvent - the world's largest crypto exchange, Binance, announced it was backing out of its plan to save FTX, less than 30 hours after announcing its intent to acquire it.
What could this mean to the remainder of the cryptocurrency universe?
For casual followers of crypto, the market goes as bitcoin goes. And it's not going well - bitcoin has now lost 75% of its peak value from a year ago.
As Warren Buffett has said, "only when the tide goes out, do you discover who's been swimming naked." The "tide" in this case, is the easy money, low inflation era.
The tide has gone out, and the mal-investment is being exposed. That includes high valuation, no earnings tech companies ... SPACs ... and crypto currencies (to name a few).
Pre-financial crisis, this FTX failure would very likely create waves/shocks in the financial system. After all, FTX has tentacles reaching throughout the crypto universe, major venture capital firms and hedge funds. But the scale, even of crypto in aggregate, is nothing compared to the trillions of dollars global central banks have lobbed around, over the past fourteen years, in response to the many crises.
What this FTX event will do is give politicians a clear excuse to do what they've already promised: they will regulate away private money, to maintain their monopoly on money.
Markets are Noisy.
The Gryning Portfolio makes calm out of the chaos.
Models & Frameworks is what I use to help you exploit trading opportunities inherent in macroeconomic and policy-related developments.