00:00Let's start with crypto. A, is the volatility over, at least for now? And B, please share your thoughts on crypto treasury companies with us.
00:12They're very related answers, Guy. Good morning. I don't think the pain is over for crypto overall.
00:19I do think it's really, really important that MicroStrategy came out yesterday afternoon and said that they have a reserve fund to pay.
00:25I can't remember how many months, but I think it was their next 14 months of dividend payments that they're going to owe, which was a big relief for the market because it is that dynamic around MicroStrategy and the broader digital asset treasury sector, which has been really weighing on crypto over the past month or so.
00:40Now, part of the reason getting into digital asset treasury companies, part of the reason that I have been negative or the main reason I've been negative on crypto over the past five weeks and hence worried about the volatility seeping into the broader market is the whole digital asset treasury company dynamic that with all the ETFs and the leverage that is built around that, they are now a multiplier on the way down in the same way they're a multiplier on the way up.
01:03So they amplify the moves in both directions. And many of them are turning into a negative kind of death spiral that as their stock price trades below their crypto holdings, the only logical move is to start selling down their crypto holdings to exacerbate the moves and the downside.
01:17Now, most of these companies have kind of chased it and are late to the trade. MicroStrategy is the big one and it's really important.
01:24And that's why their statement yesterday is a big relief.
01:25But I still think there's concern around this sector because more and more people are starting to wake up to the idea that ultimately these companies are probably going to have to start selling down their crypto holdings rather than just accumulating forevermore.
01:37And Mark, that was part of the risk off mood that we've seen over the last 24 hours, but arguably it went a little further.
01:44Have you given up on stocks this side of this side of Christmas?
01:48Is that your stance on equities as we go towards the end of the year, Mark?
01:51Yeah, I think the backdrop here is still quite positive for stocks in terms of that you've got a lot of liquidity in the system.
02:00You still have companies making a lot of money. We're still in the inflation stage of the AI CapEx bubble, which means money is being thrown about.
02:07The really profitable major companies in the world are throwing that money into other parts of the kind of stock cycle, stock sectors.
02:15And therefore, that's positive. You've also got growth holding up OK, and you've got the U.S. administration pressurizing the Fed to have easier monetary policy than orthodox economics would suggest.
02:26Everything is constructed for the stocks rally to continue globally into the year end.
02:30Now, I'm more bullish the rest of the world than the U.S., but I think the U.S. as well will make fresh records next year.
02:35Now, because of that view, people start getting this time of year doing the year ahead outlooks and getting very enthusiastic to kind of get on board the bullish train now.
02:41So, we know the seasonals are generally good. People chase year-end trades. They talk about the Santa rally.
02:47There's this idea that this is the time to kind of position, if you think we're going to make fresh records, why would you not get bullish now?
02:52I am more worried about that. I think that we're probably going to get a hawkish cut from the Fed next week, which is going to be problematic in the margin.
02:59And I think that the crypto sector is going to have more and more downside, and that's going to hurt the retail sector.
03:04We've already got a K-shaped economy pressuring through the cost of living and rising unemployment at the lower end of the income spectrum.
03:10So, I think that's going to pressure investor sentiment across the spectrum, which is going to add to volatility and make it harder in the short term.
03:20Santa might not be coming. That is the conclusion of all of that.
03:24Bloomberg MarketsLive executive editor, Mark Cobmore. Thank you very much indeed.
03:28You can also follow Mark and the rest of the team. Fantastic coverage. MLIB Go on your Bloomberg terminal.
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