OSL Trader View | Weekend Digest

Friday, March 27, 2020  


Are we gearing up for the next big US boondoggle?  The Fed is the lender of last resort in the US, and American banks, corporations and households will soon have the multi-trillion dollar subsidies arriving at their doorsteps - through one acronym or another (CPFF, MMLF, TALF, PMCCF, SMCCF…). 

But who gains? The initial stimulus announcements have already awakened the bulls, over the past three days, on Wall Street.  Not to insinuate anything, but that was some precocious timing by Senator Loefler - who was found to have dumped stocks after attending non-public coronavirus briefings. Meanwhile US airlines have their caps in-hand seeking a $110B bailout - after spending more than $90B buying back their own shares. The modest concessions extended to Main Street through “relief programs” may just be a mask on the erosion of wealth that’ll plague many of them (pensioners, boomers, and the next generation alike) for countless years to come. All the while those on streets behind opulent guarded gates get/take more.

The real hammer:
“In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent, effective on March 26th.” 
 - The Federal Reserve, 03/15

 They are quite literally, firing from all barrels. 

And this doesn’t account for the additional $500bn in aid that the Senate is looking to push through - a figure alone that’s three times the bailout to AIG and the big three US auto manufacturers 11 years ago. The Democrats have quite aptly dubbed the bailout package as “Mnuchin’s slush fund.” The name is a bit of a misnomer because guess who claims he will decide who gets what? You guessed it… 

The fact that Ford has lost its investment grade status and GM has been put on negative watchlist, is likely a harbinger of more to come. In March alone, Bank of America calculated total net downgrades on $284bn worth of paper while S&P’s tally of cuts at 565, quarter-to-date, is the most on record. 



It is highly likely that American corporates will continue their time-old tradition of deploying ginormous wads of cash to buy back their own stock (over 70% of S&P 500’s 2018 earnings were accounted for by $797.9B in buybacks) and with the backdrop of the fastest 20% drop we’ve seen in history we can only expect this to increase.  

It’s entertaining to see commentary that digital assets are suddenly in sync with the markets. 

Well, even a broken clock is right twice a day… 


A closer look at the digital asset space this week:

Bitcoin has mopped the floor at $5k and is now back to testing $7K, three weeks since the 50% drop, after having seen many of the malfunctioning parts of the ecosystem patched up and ready for the next rollercoaster.  

Finastra’s outage serves as an important reminder of the current fiat on-ramp bottleneck. Over 800 crypto players were impacted to the tune of $200mn in delayed wire transfers as it addressed a security threat.  

Maker has managed to broker peace, as their backers bring up the rear and wear the losses as they remain determined to keep the DeFi platform afloat. It turns out that three addresses were the winning bidders for the majority of the MAKR vaults. They have successfully stopped the rush to the gates as collateral value holds steady above $300mn, for now.

$HIVE (+12.8%) has since successfully forked away from $STEEM (-2.3%). Sun and posse have successfully attracted most of the content producers to switch to the new network. $HIVE volumes, albeit low, are 40% more than what you are seeing in $STEEM.  

The Tezos foundation has seemingly had enough and has put the class action lawsuits behind them by settling behind closed doors. Whether this propels $XTZ to punch through its 52-week resistance ($1.80) remains to be seen. 

Telegram has been less fortunate as they appeal the latest injunction awarded to the SEC. The ruling says the release of GRAM to the public, by launching the network, would in essence be “an integral part of the sale of securities without a required registration statement.”

Bitfinex, Tether, Telegram are all in the same unfortunate bucket of not being American companies, but dominant players... so read into that as you like.  

TON labs has decided to circumvent this issue by hard-forking the public code, and launching the network without the Telegram messenger. Godspeed… 

We are just days away from the deadline set for Mt Gox creditor’s rehabilitation program. With fiat claims given priority, claimants for the 141K $BTC & 152K $BCH (as of March ’19) may very well choose to take a haircut and seek closure. This is more than 2x the $BTC that was taken in the PlusToken scam that has been attributed as the cause for several unexpected free falls in the market… 


Before you search The Big Short (or Rambo) on Netflix to continue your weekend at home, some lasting words

Are we on a merry-go-round? History appears to be repeating itself with reflating capital markets and asset prices further enriching the top 1%.  One thing for sure, more attention is being paid to the bottomless-pit of support the Fed and the Treasury are throwing at the problem. Money does talk, and these players are talking trillions. Lest we forget the timing of Satoshi Nakamoto’s initial white paper.

If you don’t like this narrative or the fact that your wealth is being printed away, think of most digital assets as a hedge against inflation. Buy the hedge - shout to your OSL trader today!



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