Market Morning: Yield Curve Hysteria, Bitcoin Trading Faked, Brexit Goes Bananas, Mueller Report Out

Market Morning

Market Freaks Out Over Yield Curve Inversion A Bit Prematurely

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In what looked like a positive feedback loop on Friday, long term interest rates began to crash, sending the S&P 500 (NYSEARCA:SPY) down nearly 2% and holding at the 2,800 support level. The 10Y Treasury yield was down over 10 basis points, while short term rates pretty much stood still, the 3M T-Bill yield only falling 1.4 basis points. This resulted in a slightly inverted yield curve from 3M to 10Y, though the 2Y-10Y spread is still 12 points positive. However, this doesn’t seem to indicate an imminent recession, at least not in the next 3-6 months. After that, maybe, but the last time the 3M-10Y spread went negative was July 2006, and it took over a year for equities to get serious affected by this, and recession didn’t become official half a year after the yield curve inverted at this specific point in the curve. The time before that, it was inverted from July 2000 to January 2001. Recession began in March that year. Also, in 1998 the 3M-10Y spread was negative for a month and nothing happened, so this could be nothing.

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Gold and Silver Getting Back in Vogue?

The mainstream media is starting to pay attention to gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV) again, despite the fact that platinum (NYSEARCA:PPLT) is at historic lows relative to gold. CNN had a piece out this weekend about how much gold one should buy if he can’t afford to buy any. Citing “investing experts,” CNN says that they say that gold, silver and other precious metals like platinum and palladium, could make sense as a small part of a broader investment portfolio. Talk about diving into controversial waters, making a bold statement like that. Bringing bitcoin (BTC-USD) into the fray, the article again cites “investors”, this time not experts though, saying that bitcoin and other cryptocurrencies are viewed as assets that could behave similarly to gold and silver. Gold and silver never lost 85% of their value in a few months though.

95% of Cryptocurrency Trading Activity Faked, Says Bitwise

Bitwise, a securities firm trying to get another Bitcoin ETF past the Securities and Exchange Commission, says that 95% of cryptocurrency trading volume is faked. While Coinmarketcap puts daily trading volume of all cryptocurrencies at about $6 billion in the aggregate on average, Bitwise would only find legitimate evidence for about $273M of that volume. Bitwise in its presentation reported by the Wall Street Journal accuses exchanges of wash-trading or straight up fake volume. Wash trading is buying and selling from two different accounts in order to generate volume without changing price. The analysis was made compiling data from 81 exchanges over 4 days.

Everyone is Fed up with May

May’s last vestiges of allies are pretty peeved that she’s looking into the possibility of a much softer Brexit now that she can’t get her deal through parliament and had to request a delay. Many Brexiter ministers are threatening to resign, but that would just lead to a general election, and who knows how that would impact any extension to Article 50 already agreed with Brussels, but it does look like May will be forced to resign sometime this week. Pro Brexit ministers are urging May to support no-deal and just get the thing over with and see if the EU can actually handle it, which they probably can’t but don’t want to admit. They can’t even raise interest rates into positive over there, so a no deal Brexit could end up causing a systemic European crisis much worse than anything that would result in the UK itself.

Nobody Knows What’s in Mueller’s Report, But It Can’t be Too Exciting

Former FBI director Robert Mueller released his 22-months-in-the-waiting investigative report as to whether there was “Russian meddling” in the 2016 election. Mueller handed over the report to Attorney General William Bar on Friday afternoon when nobody pays attention to the news because they’re going home for the weekend, so given that, there probably isn’t anything all that exciting in it. The “Intelligence Community”, known for their communal intelligence among other things, were convinced that Russian agents bought ads on Facebook to get Trump elected, which is the worst thing that ever happened. There’s also suspicion that Russians were involved in the hacking of emails, which Julian Assange, who really don’t like Trump anyway, denies. The emails weren’t doctored though. Estimates are that some kind of summary of the report should be ready by the beginning of the week.






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