Financial topics

[vincecate]

Seems people are expecting CPI of 8.1%, lower than last month's 8.5%.

[richard5za]

Seems people are expecting CPI of 8.1%, lower than last month's 8.5%.

Yes, the consensus is 8.1%. If this is the case I suspect we'll see a short term rally in SP500; short term bear market rally because 8.1% is still a horrendous number.
Markets globally are rallying today in expectation of USA markets going up.
If the figure is above last month i.e. above 8.5% I reckon shorting will be in order!

I think there's another factor to consider in terms of the medium term. Expectations for SP500 earnings for 2022 is $ 235. We've got stagflation and we are in a bear. So 15 is an optimistic PE ratio in a bear with which to forecast the market. 235 X 15 = 3525. So SP 500 has a magnet down to 3525. However higher interest rates will push down earnings and PE could go down to 10. So say earning miss by 30% times 10 = 1645. Add an emotional overshoot which is human nature and you get less say 1300.

I think there's a long way down still to go

[vincecate]

8.3%

https://www.bls.gov/news.release/cpi.nr0.htm

[richard5za]

8.3%

https://www.bls.gov/news.release/cpi.nr0.htm

Yes, and S&P futures down below 4000

[richard5za]

On a seperate subject the crypto space is looking very vulnerable

There's a lot of borrowed money against crypto; potential for a liquidation?

[John]

** 11-May-2022 World View: Capitulation = Panic

> 8.3%
> https://www.bls.gov/news.release/cpi.nr0.htm

The CPI reading was higher than the 8.1% that was expected, and this
resulted in a sharp reversal in stock futures from positive to
negative. This unexpected reading led to a lot of analyst discussion
over whether a "capitulation" has occurred, which would mean that the
stock market had bottomed out, and would start going up again.

So I just learned something new today. I've wondered for a long time
exactly what "capitulation" means, but after today's discussions I
realize that it means the same as "panic." They described
capitulation in exactly the same way that they would describe a panic.
One comparison was to 1987, where there was a panic, and then the
stock market went up again.

As I've written many, many times in the past, the 1987 panic was a
false panic, like the 1914 panic, since the S&P 500 P/E Ratio
(trailing) was around 14, which was the historic average, meaning that
stocks were fairly priced, so they recovered quickly after the panic.

** 20-Oct-17 World View -- Economists baffled on 30th anniversary of 1987 stock market panic
** http://www.generationaldynamics.com/pg/ ... tm#e171020


Today, the P/E ratio is 22.5, which is far above the historic average,
which means that stocks are far overpriced, just like in 1929. This
means that when a "capitulation" or "panic" occurs, it will be like
1929, rather than 1987.

https://www.wsj.com/market-data/stocks/peyields

On a separate subject, I've never really understood why it was even
possible for a "Stable Coin" to remain stable, but apparently it
can't. In the last week, they lost 50% of their value, and as Richard
points out, all cryptos are under a great deal of pressure.

*** Controversial stablecoin UST — which is meant to be pegged to the dollar — plummets below 50 cents
https://www.cnbc.com/2022/05/11/terra-u ... rcent.html

A lot of people are going to be very worried today.

[Cool Breeze]

On a seperate subject the crypto space is looking very vulnerable

There's a lot of borrowed money against crypto; potential for a liquidation?

The thing you all don't understand is that "crypto" is not BTC.

BTC is an asset that is not a security. It has different characteristics than the rest of the "crypto space" which is why it will always be different, and also why there is such a concept as "Bitcoin Maximalist".

[vincecate]

On a seperate subject the crypto space is looking very vulnerable

There's a lot of borrowed money against crypto; potential for a liquidation?

On a "Crypto Exchange" website you can buy crypto with huge margins (sometimes even near 100 to 1).

Some stablecoins could be like a currency board and hold a dollar for every stablecoin dollar they issue.
https://en.wikipedia.org/wiki/Currency_board

The Fed/Government has noticed though that these stablecoins don't have regulators looking over them or
anyone checking books, so they may not really have enough dollars to cover the coins issued.

Some of them are clearly using Bitcoin as part of the backing. Most of the people who are really into crypto
don't really like fiat money.

And then there are "algorithmic stablecoins". The idea is there is a pool of Bitcoin that backs
a set of stablecoins, and an investment coin that's value is sort of how much more the Bitcoin is
than the current owed on the stablecoin. They may loan
out the stablecoins for some interest. They hope to structure things so that
the stablecoin is always stable and the investment coin grows in value. This is what
the Terra/Luna/UST was. This one went bad and resulted in a lot of Bitcoin being sold and
the peg being lost and the investment coin down by over 99%.
The guy who did this had done a failed stablecoin before anonymously:
https://www.coindesk.com/tech/2022/05/1 ... agues-say/

So there is lots of borrowed money and there is selling pressure as it unwinds.
So we can get a crash in crypto.
A crash in crypto can spill over to stocks.
I think the Fed would love to be able to blame a stock crash on crypto
so as to divert blame from their QE/QT games.

My personal hope is that my S&P puts become worth a lot of money at the same time that Bitcoin's price is very low so I can buy a lot of Bitcoin. Still think this can happen. But I did not sell any of my Bitcoin because I think it is also possible for something to happen that shoots Bitcoin's price way up. For example, Putin could say that to get Rubles for buying oil you had to send Bitcoin.

[vincecate]

The thing you all don't understand is that "crypto" is not BTC.

BTC is an asset that is not a security. It has different characteristics than the rest of the "crypto space" which is why it will always be different, and also why there is such a concept as "Bitcoin Maximalist".

Many of the other crypto seems to have automatic update as part of the server node software. What this means is that the guy releasing the software can make any change he wants and all the nodes switch to that new code right away. The problem is that the guy releasing the software then has total power over what the nodes do. He is a central point of failure. You can imagine someone with a gun to his head making him release software that makes the gun holder rich. Or a government telling him that he has to do something so they can monitor things or block bad people. In Bitcoin there is no automatic update. We could all use the same software we have now for the next 20 years and be just fine.

Bitcoin is simple enough and has been around long enough that the code really should be ok even if nobody patched it up
for the next 20 years. This is not true of the other new "innovative" (much more complicated) coins.

The other thing is that Bitcoin has a small blockchain, maybe 260 GB, and limited internet traffic (maybe 1/2 mbit), so a regular computer with a regular internet connection can run it fine. Some of the other ones have far larger blockchains and far larger internet traffic so regular people with regular PCs and regular internet connections can not run nodes. So Bitcoin is far more P2P than others.

With Lightning on top of Bitcoin we can handle huge numbers of transactions without increasing the blockchain size. It is a great thing.
Seems a much better solution than the others. I wrote a post about Bitcoin/Lightning: http://howfiatdies.blogspot.com/2022/04 ... tning.html

Because there is nobody any government can go after as backing Bitcoin, it is being seen as legally different than the others.
In the other cases they could get in trouble for issuing "an unlicensed security" but there seems to be no chance of arresting Satoshi
nor forcing him to send out an automatic update that shuts everything down (which could be done with others).

So Bitcoin does seems special.

[richard5za]

On the subject of the crypto space, I am watching (with great interest) the matter of Michael Saylor, his company Microstrategy, and Bitcoin. Maybe his company blows up?