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In This Issue:
Make A Bold Call That Nobody Else Believes In
Bitcoin Rejected Hard
Yields Continue To Rip, Markets Reeling
Grayscale Wants Another Spot ETF
This Crypto Company Actually Earned Legitimate U.S. Approval
Coinbase Expands To Singapore
Honda Turns Crypto-Friendly
Bitcoin Faces Recession | Macro Monday
Make A Bold Call That Nobody Else Believes In
Bill Ackman is an extraordinary investor.
Known as ‘Baby Buffet,’ William Albert Ackman (born May 11, 1966) is the American billionaire behind Pershing Square Capital Management. Some of you may know Ackman for his famous Herbalife short that resulted in an epic face-off against Carl Icahn on national TV, but that's a tale for another time. Today, I want to delve into a recent talk Ackman gave at the conclusion of CNBC’s Delivering Alpha Summit and deliver you the condensed alpha.
Let's dive right in.
Early in the interview, Bill Ackman was asked a simple question: How would you describe your positioning today? I really like how Ackman responds. “Similar to what it has been historically, we own 8 amazing companies. We have a tiny little investment in Fannie Mae and Freddie Mac, which together represent a little over 1% of the portfolio, options on an ultimate risk. We buy great businesses we think will do well in any economic, political, or macro environment.”
Curious about the eight companies? Well, with a bit of research, you can find Pershing Square's portfolio online. It's fascinating that investors can easily discover what hedge funds own and even replicate their investments if they choose to do so. In case you're not familiar with the stock symbols, here's a list of the companies in Pershing Square's portfolio, each with a percentage weight ranging from 10% to 20%: Chipotle, Restaurant Brands, Lowe's, Google, Hilton, Howard Hughes, and Canadian Pacific.
Following that question, Ackman discussed his additional bet on rates continuing to rise, and the interviewer took this as an opportunity to inquire about the status and duration of this bet. In response, Ackman provided a brilliant yet straightforward answer that could serve as a guiding principle for all investors when evaluating their positions. Ackman's response was, 'Until we are proven right or wrong.' Shifting the conversation back to equities, the interviewer commented, 'You must hold a negative view of the equity market. How can you maintain a positive stance on stocks if that's your perspective on bonds and yields?’
“The key is owning businesses that have pricing power. Business that can do well in a world of 3% inflation. It's hard to manage a business in a world that has volatile inflation. The kind of companies we own, are like royalties. We own Universal Music, it’s a royalty on listening to music. Google is a royalty on people advertising on the web. Restaurant Brands is a royalty on people eating at restaurants. The beauty of these kinds of businesses is that inflation is ultimately their friend, as long as their costs don't inflate as quickly as their revenues. I feel comfortable owning these kinds of businesses even if inflation stays high.”
Another collection of high-level thoughts from Ackman later in the interview.
“Short selling is something we never liked. Since Herbalife, all we do is own really great businesses and if you want to be a really successful investor over time, you find great businesses, buy them, and do nothing….We don't collect 30 things with 3% of our capital. We buy businesses that we feel very comfortable with that we can sleep with at night…And not everything we buy goes straight up. What normally happens is you buy something, you make it a meaningful position and then something happens to make the market not like the stock, and then you can buy more at a better price.”
This pretty much concluded the portion of the interview I wanted to share here, but I wanted to end on a crypto note before wrapping up. Crypto wasn’t mentioned in the interview, but Bitcoin fits the descriptions of what Ackman is looking for. It is a great purchase in any economic, political, or macro-environment; it’s something that should be held until we are proven ‘right or wrong;’ inflation is Bitcoin’s friend, and Bitcoin is a royalty on individuals opting out of a fiat system. Take a look at what Ackman has said about crypto at a different event a year ago.
“I was initially a crypto skeptic [but] I have come to believe that crypto can enable the formation of useful businesses and technologies that [before now] could not be created. Crypto is here to stay.”
It’s only a matter of time until hedge funds begin to take on meaningful positions in Bitcoin and crypto.
To close out, I’ll leave you with Ackman’s famous investing motto— Make a bold call that nobody else believes in. Bitcoin is our bold call and the world is still doubting it. That’s exactly where we want to be.
Bitcoin Rejected Hard
The move two days ago was wonderful… but I was being cautious because it went straight into resistance, as discussed. As you can see, price was rejected right at the 200 MA on the weekly for now, although we still have 5 more days of price action on this candle to watch. That level will be the key to keep an eye on for the week.
Not much to like here. Yesterday’s candle was ugly, pumping through 3 levels of resistance - the 100 MA, the 200 MA and the horizontal level at $28,473. Price closed below all three, with a long wick up and large blue body. That’s a bearish candle. Also, you can see how perfectly the actual close of the candle two days ago and the open yesterday were rejected at that 200 MA.
Bulls still have a lot of work to do.
Yields Continue To Rip, Markets Reeling
Stocks are taking a hit as U.S. Treasury yields continue to soar, reaching their highest levels since 2007. This has fueled concerns among investors about the potential long-term impact of elevated borrowing costs on the economy. The rate on 10-year Treasuries touched 4.74%, and experts like Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, are suggesting it could hit 5% soon. This sentiment has had a ripple effect on other markets: S&P 500 index futures are down by at least 0.5%, and West Texas Intermediate crude is trading below $89 a barrel. Concurrently, the dollar index reached a 10-month high, further indicating market nervousness.
Wall Street is also sounding the alarm, with strategists from Goldman Sachs, Morgan Stanley, and JPMorgan Chase warning that we could see further declines in the stock market. These warnings come amid a hawkish turn from Federal Reserve officials. After successfully averting a government shutdown, expectations are now growing for a possible rate hike by the Fed in November. Multiple Fed policymakers, including Cleveland Fed President Loretta Mester and Governor Michelle Bowman, have hinted at the need for rate hikes. Upcoming labor market data, including U.S. job openings and the crucial monthly payrolls report due on Friday, are likely to play a significant role in shaping market expectations about the path of interest rates.
Key events this week:
China has week-long holiday
US August JOLTS report, Tuesday
New Zealand rate decision, Wednesday
Eurozone services and composite PMIs, Wednesday
ECB President Christine Lagarde gives welcome address at conference, Wednesday
US ISM services index, Wednesday
France industrial production, Thursday
BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
US trade, initial jobless claims, Thursday
San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
Germany factory orders, Friday
US unemployment rate, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.6% as of 9:11 a.m. New York time
Nasdaq 100 futures fell 0.7%
Futures on the Dow Jones Industrial Average fell 0.4%
The Stoxx Europe 600 fell 0.8%
The MSCI World index fell 0.4%
Currencies
The Bloomberg Dollar Spot Index rose 0.2%
The euro was little changed at $1.0473
The British pound was little changed at $1.2081
The Japanese yen was little changed at 149.88 per dollar
Cryptocurrencies
Bitcoin fell 1.3% to $27,467.05
Ether fell 0.6% to $1,656.23
Bonds
The yield on 10-year Treasuries advanced three basis points to 4.71%
Germany’s 10-year yield was little changed at 2.92%
Britain’s 10-year yield declined four basis points to 4.53%
Commodities
West Texas Intermediate crude fell 0.4% to $88.43 a barrel
Gold futures fell 0.4% to $1,840.10 an ounce
Grayscale Wants Another ETF
In the midst of Ethereum futures ETFs making their debut, Grayscale has taken a significant leap to convert its $5 billion AUM ETHE trust to an ETF, which is the largest ether investment product in the world. Just to reiterate, Grayscale has gained momentum, particularly after its recent victory over the SEC, but obtaining approval for an ETH ETF will be a far more challenging endeavor than the conversion of GBTC. Patience will be crucial in this process; I can already see Bitcoin maxis dunking on Ethereum when the approval comes.
In other Ethereum ETF news, nine Ethereum-based ETFs were launched yesterday, with four of them blending Bitcoin into the products. The trading volume on these products on the first day was relatively average and not particularly remarkable. This outcome shouldn't come as a surprise since institutional investors definitively want spot assets over futures. For those curious about a comparison, BITO reached $200m in volume in the first 15 minutes, whereas the entire group of ether ETFs struggled to break $2m early on in the day.
Here is an excerpt from Grayscale CEO Michael Sonnenshein on the ETHE announcement: “At Grayscale, our unwavering commitment is to offer investors transparent and regulated access to crypto through product structures that are familiar. As we file to convert ETHE to an ETF, the natural next step in the product’s evolution, we recognize this as an important moment to bring Ethereum even further into the U.S. regulatory perimeter.”
This Crypto Company Actually Earned Legitimate U.S. Approval
U.S. occupants might not be familiar with Tap - a leading money app in Europe - but through its recent partnership with Zero Hash, a regulated U.S. entity, the company has established a path to launch in the U.S., ensuring regulatory compliance. This official approval allows Tap to offer access to 24 digital assets, including major cryptocurrencies, facilitate P2P transfers, conduct swaps, and provide deposit and withdrawal options. Additionally, later this year, Tap will launch a fiat-to-crypto on-and-off ramp, enabling customers to buy and sell crypto via ACH bank transfers. For reference, Tap has onboarded hundreds of thousands of users to the crypto economy and already has over 200,000 registered for the US launch.
It is great to see progress onshore.
Coinbase Expands To Singapore
Coinbase Singapore has obtained a Major Payment Institution (MPI) license from the Monetary Authority of Singapore, highlighting its commitment to the Singaporean market. This license empowers Coinbase to extend its Digital Payment Token services to both individuals and institutions in Singapore, a thriving nation that Coinbase has recognized as a 'vital market for Coinbase.' According to the press release, “Singapore is home to over 700 Web3 companies,” and “25% of surveyed Singaporeans are considering crypto as the future of finance.” Having seen the growth happening firsthand in Singapore, these numbers don't surprise me in the least. The bear market doesn’t exist in the East.
Honda Turns Crypto-Friendly
The Tokyo-based car, motorcycle, and equipment manufacturer, Honda, is now accepting 46 different crypto payments on your next ride. I understand that Honda doesn’t draw in the crowds like Tesla, but beggars can't be choosers, so we will take what we can get. Also, this isn't Honda’s first foray into crypto. The car company partnered with Animoca Brands Japan at a Formula 1 event last year to issue NFTs to attendees. I doubt this news forces the hand of Tesla to return to crypto, but my money is still on Elon making a grand return when the time is right for him and Tesla.
Bitcoin Faces Recession | Macro Monday
Join Dave Weisberger, Mike McGlone, and James Lavish as we break down what's going on in macro and crypto!
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.