Dead cat bounce or does the equity market have what it takes to reverse that negative bear market stigma? As we highlighted over the last few weekly notes, we suspected the equity markets would bounce. However now, we feel that the euphoria has hit some technical levels that should put to test the veracity of this rally. We like to take a longer-term approach in times like this as everyone is all goosed up about the rebound, because fundamentally nothing has really changed. In fact, one can argue where fundamentals are concerned, the backdrop continues to weaken, global instability continues to gain, and the US government furlough seems to be foolishly overlooked.
Nothing more wets the contrarian investors’ appetite then when these 3 little letters start making their rounds around the financial sphere. What three letters you ask? “CDS”, Some of you novices might not be old enough to remember the damage that these things did a decade ago, but I love a good rehypothecated insurance product, don’t you? What risk is there any more, markets just rise and rise and its cherry Kool-Aid stained T-Shirts for everyone right? Yea more like blood stained in disguise, masked under trillions of global central banks interest rate fixing, bond buying, #QE4EVR regimes. Anyhow lets just take a look at Italian 5Y CDS shall we:
So let’s get to it, what did we learn over the past week? We were informed by Intel that its computer chips were affected by a bug that makes them vulnerable to hacking. All computers with Intel chips from the past 10 years are affected. Considering that computer chips are basically the backbone and brain behind everything electronic including the entirety of the internet itself, this should be very alarming news. We can’t say that we are surprised, we have said in many past writings that the internet itself will have to adapt to these internal threats. Not to mention the internet security threats that future quantum computing presents. To say that this news out of Intel is alarming, is quite an understatement and it’s why the future of technology will need to be completely and openly discussed by all major stakeholders. This will take a collaborative effort, one by which profits will need to be set aside for the greater good. Whether or not this can be achieved is another thing, but the viability of the internet, the Internet of Things and Artificial Intelligence comes completely into question now. Intel’s stock price barely fell 5% and why should it, if these things need to be replaced, that means more sales and of course no rebates.
Also out this week the AP reported that the FED projects $80.2 billion in remittance back to the Treasury Dept. Here is a chart of the last decade in remittance. As you can see the FED has paid back billions to its enabler, is it safe to say this is like a drug kingpin and his pushers…maybe that’s too harsh…Anyway the charts show 3 years in a row of declining remittance and one thinks we can just continue to raise rates, can you imagine this levered behemoth and its Dv01 crushing leverage if equities turn and interest rates rise?
Apparently Bitcoin has a future, CME Group announced today that they will be offering a Bitcoin based futures product in Q4 2017. We mentioned or rather made a notion to the fact that the CME Group started keeping track of the price of Bitcoin on their website, awhile back in our past letter. As our readers know, we saw the writing on the wall long, long, ago. We figured the space was attracting too much attention in the land of speculation and the CME simply, couldn't resist. We can only speculate, but we figure the higher ups at the CME fought long and hard trying their best to resist delving into such a known "nefarious product," but as always, the prospect of losing money, or rather not making money off of all this trading, most likely led to them finally caving in.