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Interest Rates
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Don't rule out Gold quite yet...

Real interest rates are a key driver for gold prices. As real rates are starting to roll over (see chart on top), gold seems to be catching a bid. Furthermore, looking at growth slowing in the second part of the year and in 2022, participants are perhaps getting more constructive on the possibility of real rates declining further and gold prices heading higher. Another reason more astute investors may want to be constructive on gold, is the possibility of BTC stumbling. Flow data clearly shows that a competition for investment has developed between the two assets (see chart on the bottom). Should regulatory changes stifle BTC's otherwise unstoppable ascent, gold may end up benefiting. Plan "B" to "Plan B" if you wish, against currency debasement.

John Crockett
Independent Global Macro Investor

Inflation Stats Really Picking up while Treasury Yields Fall - what next?

These retail sales & inflation stats are really impressive and near record levels and yet the bond market rallied yesterday with TLT up ~2% at one point.

To highlight the impressive inflation stats, core retail sales (deflated by the CPI) at 8% last two years - highest 2-year annualized growth in 20 yrs - so this isn't just Covid base effects: (from Eric Basmajian)

Retail Sales ex-gas 2 year rate of change at +21.4% (Teddy Vallee tweet from yesterday):

Teddy does remind us how rent and financial services inflation typically lags - and lags by a lot - so the thought is that the Fed won't see all the true inflationary statistics until late 2021/early 2022. Question is will they have enough time to let things 'run hot' or will the bond market make them act again as soon as say this summer? Things feel frothy, but with so much liquidity in the system right now this can continue for awhile. 'How much longer the bond market can stave off further increases in Treasury rates?' is the big question I guess.

Was very odd yesterday watching the SPX go up on inflation news while bonds and gold rallied. As I type ZB back down this am to 157'24 after being up above 159 yesterday, so seeing a correction after yesterday's strange action, but still the bond retracement out of step with the data.

In equities, lots of chop and trouble under the hood. Biotech and some other risk on sectors... (More)

How to generate returns in $1.6n crypto of 12% with minimal risk: Lend U.S. dollars to hedge funds so they can buy Bitcoin. What could possibly go wrong?

Question:

if “Everyone wants to borrow dollars, but there’s not enough dollars in the space”

-- then why do rates of zero percent and QE-infinity not allow them to borrow dollars?

How can there be a cash shortage when central banks (and, latest, prime brokers) are lending out cash free?

How come these free plentiful dollars aren't solving the dollar shortage?

https://www.bloomberg.com/news/articles/2021-03-27/crypto-shadow-banking-explained-and-why-12-yields-are-common

Some of the largest non-bank firms in cryptocurrency including BitGo, BlockFi, Galaxy Digital and Genesis are stepping up to meet investor demand for dollars amid a long-standing weariness by banks to lend to individuals or companies associated with Bitcoin and other digital assets. In this case, they’re lending to hedge funds that need cash to buy Bitcoin for a trade that is almost guaranteed to pay out at annualized returns that have recently hit 20% to 40%.

“The people with all the money -- the banks, the brokerages -- they’re not in this space yet,” said Jeff Dorman, chief investment officer for Arca Capital Management, which specializes in digital assets. “Everyone wants to borrow dollars, but there’s not enough dollars in the space,” Dorman said. “There is a huge cash shortage.”

[...]

Here’s how the trade works. It starts with the price discrepancy between the spot price for Bitcoin and the value of derivatives contracts that come due months in the future, what’s known as a basis trade. On March 15, Bitcoin traded for $56,089 while the July future contract on CME Group Inc.... (More)

The Macro Cafe. Episode #9

An updated overall technical view of the major asset classes Bitcoin, Oil, Gold, Sp500, Yields, Dollar Index, Asset Rotations .

https://youtu.be/v60rLDyKvvw