🔔 Powell DOESN'T shock

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Here's what $UNI and $BNB (Uniswap and Binance) have done recently...

Mental sector, right?

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🔥 Hot and 🚫 Not

King Dollar! We sent the below to premium members back in November...

You can read the full piece below 👇

Have a look at where USDJPY is now trading.

Deserves some rockets 🚀🚀🚀🚀🚀

Teknikals: it's currently trading well above the 100 daily moving average and the move has been vigorous, and perhaps not necessarily in line with our initial thesis, since bond yields took a line of cocaine and flew up to 1.6% this year - which we didn't necessarily expect to happen so quickly.

I'd expect a touch of hold up for now after Powell sort of calmed the whole yield frenzy

Here's a thread on what he said yesterday from PriapusIQ (give Ryan a follow)...

 🔹 Inflation is below 2% and it'll pick up on base effects.

🔹 It's unlikely that deeply ingrained low inflation expectations would change.

🔹 It is more likely inflation increases will be one-time.

🔹 It will take some time to get back to max employment.— PiQ (@PriapusIQ) March 4, 2021 

Powell doesn't want to raise rates 'just because' and is taking a very loose and observant stance on the state of inflation...

Which technically should be good for markets, but...

🚫 Not hot is tech: NASDAQ futures are down almost 11% from the highs.

Doesn't mean I'd be a seller down here though, oh no.

There's no bad news left really, especially in bonds.

Powell has solidified his stance, we know where employment is (in the gutter) and I really don't reckon inflation is going to make a broad comeback...

Perhaps short term, but not the doomsday scenario that many reckon.

This was sent to me from the Bespoke Investment Group today (cheers The Veteran)...

Bespoke Investment Group

What to make of all this? In our view, the narrative that markets are worried about inflation is inconsistent with Treasury market movements in recent weeks.

Instead, we see a market that is pricing in a much tighter Fed once interest rates do start to rise.

Whether that will prove true or not is an open question, but what we can say is that inflation expectations are unlikely to be driving bond selling given where changes in yield are taking place on the curve and the performance of inflation pricing over the last few weeks.

Basically, if you look at the chart above...

The 5s10s curve has seen rapid steepening, but the long end of the curve (10s30s), which is most sensitive to inflation, hasn't budged.  If inflation concerns were surging, 10s30s would not be stable over the last few months.

There is a risk though that the CPI basket from last year in the US, does not adequately reflect people's buying behaviour (it's basically tracking 2019 spending behaviours).

Still, that doesn't mean that the Fed will do anything, and our post from back in January is solidified by what Bespoke have said here.

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Important read today...

Who?: This is from MICROPOD and I wanted to highlight it because they are clearly focused on demographic changes, like we have been of late in the various articles we have written, namely the below 👇

What they sayin'?:

Productivity growth in Europe has been on a downward trend for several decades. Given that productivity growth is a crucial source of output growth, particularly in an aging society like the European Union, it is crucial to understand what is driving this slowdown and what the potential consequences are for our economic model and for citizens’ welfare.

Some explanations for this trend are global in nature, but there are also significant differences in country structures in Europe that have led to different outcomes and that need to be accounted for before policy prescriptions can be made.

The objective of MICROPROD, an EU-wide research project that runs until the end of 2021, is to contribute to this research strand by using data from various European countries to study the microeconomic mechanisms behind this macroeconomic phenomenon.

Here's the all important article...

Now what do I consider important about this article?

Another significant result is that intangible capital investments are concentrated in a few firms: many firms invest nothing or very little in intangibles, while a few firms have very large intensities of intangible capital (Kaus et al, 2020).

And while it is true that investment in intangibles is beneficial for firms’ productivity, it is also true that concentration implies that only a few firms benefit from the boost in productivity provided by intangible investments.

This might explain why the effect is less visible at the aggregate level (interestingly, this could also mean that the positive externalities of these investments are not as large as sometimes thought).

Get into contact: I actually emailed the writers of this article to share a bit of info with them...

Because we wrote about the inability of firms to 'leapfrog' larger firms under low interest rates back last year...

Full circle: everything comes back to demographics, and our economies are struggling because of the change in demographics.

It's actually quite a silent killer of economies, and will be the focus of our open letter to the Bank of England which we hope to send this week.

If you'd like to put your name to this letter, which will outline what we think policy makers are missing, then please drop us an email at s[email protected] to put your name behind it.

We think it's important that we challenge our central bankers on what has previously been a pretty opaque and mysterious bunch, who are more relevant than ever before now.

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