Is Bitcoin The Place To Be In A Volatile Market

Many investors have called Bitcoin the digital version of gold. Obviously, we know it is in a lot of ways the digital version of cash, but the comparison to gold would potentially mean that if the stock market continues to be volatile or potentially crash, then Bitcoin would be an excellent place to be invested.

However, while someday Bitcoin may genuinely be the digital version of gold, it is not yet trading as such, I’ll explain in a moment, and therefore is not likely the best place to be parking your cash while the stock markets decide which direction it wants to go.

A simple chart of with the price of Gold and the price of Bitcoin overlaid on top of each other, clearly shows the two investments have not moved side-by-side over the past year, let alone the past month when the stock has been flipping from trading lower by 1% to trading higher by the same amount every few days. Since August 8th, 2018 Bitcoin and Gold have moved in the same direction at the same time just 51% of the time. Not really movements or assets that I would call correlated. Although, since May 8th, 2019, around the time we started seeing an uptick in volatility in the stock market, the two assets have been moving in sync 58%. Still not a sign of strong correlation, but better than before and a sign that someday, Bitcoin and Gold may move much closer together.

At this time, though there are just too many unknowns with the future of Bitcoin from both a legal standpoint and an adoption standpoint for it to trade hand-in-hand with Gold.

First and foremost, Bitcoin is illegal in a handful of countries around the world. China is the largest anti-crypto country, but the list also includes Algeria, Egypt, Morocco, Bolivia, Colombia, Ecuador, Saudi Arabia, Iran, Bangladesh, Nepal, Pakistan, Cambodia, and Indonesia. Continue reading "Is Bitcoin The Place To Be In A Volatile Market"

U.S. Crude Production Growth Paused In 1H19

The Energy Information Administration reported that June crude oil production averaged 12.082 million barrels per day (mmbd), down 33,000 b/d from May. The drop resulted from a drop of 58,000 b/d in Oklahoma. Production gained the most in North Dakota (58,000) and Colorado (19,000) while production in Texas was only up 13,000 b/d.

Crude Production

A pause in the growth rate in Texas had been expected due to pipeline constraints, which are expected to be alleviated in the second half of 2019 and first half of 2020. Nevertheless, Texas production reached a new all-time high of 4.982 mmbd.

US Crude Production

The year-over-year gains have been especially impressive with the June figure being 1.410 mmbd. And this number only includes crude oil. Other supplies (liquids) that are part of the petroleum supply add to that. For June, that additional gain is about 540,000 b/d. Continue reading "U.S. Crude Production Growth Paused In 1H19"

That Precious Fed Independence

Well, what do you know? That precious Federal Reserve independence we keep hearing about turns out to be a crock.

That reality was exposed in the most blatant terms last week when William Dudley, just a year removed from his serving as the president of the Federal Reserve Bank of New York – the second most powerful position on the Fed, just below the chair – argued in a Bloomberg op-ed that the current Fed should do absolutely nothing to try to fix the economy if President Trump is hell-bent on destroying it through his tariff war with China. The Fed, he said, shouldn’t “bail out an administration that keeps making bad choices on trade policy, making it abundantly clear that Trump will own the consequences of his actions.”

But he went well beyond that, urging the Fed to use its monetary policy to help defeat Trump in the 2020 president election.

“There’s even an argument that the election itself falls within the Fed’s purview,” he said. “After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.”

Thank you, Mr. Dudley, for that admission. Some of us have suspected, Continue reading "That Precious Fed Independence"

Macro Implications, As Silver Takes Leadership From Gold

Since we noted the initial move to break the 200 day moving average – and at least temporarily break the downtrend on August 27th – the Silver/Gold ratio (SLV/GLD) has held its breakout, looking to close the week and the month of August on a signal that we have long anticipated.

silver gold ratio

Okay, but the monthly chart of the Silver/Gold ratio makes abundantly clear that nothing has happened that has not happened before during the precious metals bear market. So that is the caveat to a macro thesis that would see a change to inflationary (as led by Silver/Gold), thereby letting commodities of all stripes and many global markets out of the barn. The monthly EMA 30 (grey dotted line) is a reasonable marker for the ratio’s post-2011 containment. The ratio’s price is below that marker. Continue reading "Macro Implications, As Silver Takes Leadership From Gold"

Disney: Premature Overzealous Sentiment

Disney (DIS) ran too far, too fast prior to its recent earnings announcement that fell short of investors' overzealous expectations this early in the company's transformation. Disney's growth rotation is still in its early stages with the remediation of its ESPN property and flurry of growth initiatives to meet modern-day media consumption trends via streaming. In the backdrop, the company continues to dominate the box office year after year with a long pipeline of blockbusters in the queue. Additionally, its Parks and Resorts continue to be a growth avenue with tremendous pricing power. Disney is going all-in on the streaming front and will inevitably acquire full ownership of Hulu, and the company is launching its Disney branded streaming service that will compete directly with Netflix. I've been behind Disney for a long time, especially through this transition back to growth when the stock traded below $100 and I still feel that the company offers a compelling long-term investment opportunity given its growth catalysts that will continue to bear fruit over the coming years.

Disney's Q3 Earnings Fell Short

Disney's Q3 earnings fell short of analysts' expectations, which have become overzealous as of late with all of the company's initiatives resonating with investors and analysts alike. Disney missed on both the top-line revenue and bottom-line profit. EPS came in at $1.35, missing by $0.39 per share and revenue came in at $20.24 billion, missing by $1.16 billion. Disney's business across the board came in strong, posting growth in every category. Revenue by segment: Media Networks, $6.71B (up 21%); Parks, Experiences and Products, $6.6% (up 7%); Studio Entertainment, $3.84B (up 33%); Direct-to-Consumer and International, $3.86B (up from $827M). Operating income by segment: Media Networks, $2.14B (up 7%); Parks, Experiences and Products, $1.7B (up 4%); Studio Entertainment, $792M (up 13%); Direct-to-Consumer and International, -$553M.

"Our third-quarter results reflect our efforts to effectively integrate the 21st Century Fox assets to enhance and advance our strategic transformation". "I'd like to congratulate The Walt Disney Studios for reaching $8 billion at the global box office so far this year--a new industry record--thanks to the stellar performance of our Marvel, Pixar and Disney films. The incredible popularity of Disney's brands and franchises positions us well as we launch Disney+, and the addition of original and library content from Fox will only further strengthen our direct-to-consumer offerings."
- Bob Iger, CEO of Disney

Expectations were too high at this point in Disney's business transformation, and the realization of these financial benefits will require patience. Continue reading "Disney: Premature Overzealous Sentiment"