Bitcoin surged to over $40,000 as a flurry of short-covering intensified a rally apparently sparked by speculation over Amazon.com Inc.’s involvement in the crypto industry.
A job posting from the retail giant seeking an executive to develop the company’s “digital currency and blockchain strategy” stirred questions among analysts over whether the move could eventually lead to Amazon accepting Bitcoin as a method of payment.
As the largest digital token gained on the speculation, investors rushing to cover bearish bets fueled the rally, with the coin up as much as 15% to $39,681 on Monday. More than $950 million of crypto shorts were liquidated on Monday, the most since May 19, according to data from Bybt.com.
Last week’s stock market performance was something to see, sparking by Covid Delta Variant outbreaks. Perhaps the most frightening event was Anthony Fauci hinting that a return to indoor mask mandates for vaccinated people and booster shots may be necessary to once again curb the spread of the virus.
But the week ended higher than where is started.
But since the initial Covid outbreak in early 2020 and the burst of M2 money stock, the S&P 500 index has risen steadily along with M2 Money stock.
The Buffett Indicator (or ratio), the ratio of composite market value to GDP, shows that stocks are alarmingly overvalued.
The Shiller CAPE ratio, cyclically-adjusted price to earnings ratio, is also flashing a warning signal. Shiller CAPE ratio on Friday was the highest since the dot.com bubble of 2000.
In other news, the world’s biggest coffee producer, Brazil, saw a large portion of its coffee crop get damaged by frost, which sent coffee futures soaring to their highest point in nearly a decade.
The Q2 GDP numbers will be out on Thursday, July 29th. But for Q1 2021, we saw real GDP PER CAPITA fall 0.052% YoY. While M2 Money Velocity sank -18.64% YoY.
Headline inflation for June is running at 5.32% YoY ahead of Thursday’s GDP report.
The old adage in economics was that money printing was fine, as long as it didn’t exceed real GDP growth. Well, that old adage was shot to hell with M2 Money growing at 13.84% YoY while real GDP per capital is growing at -0.05% YoY in Q1 2021.
As of July 14th, we have seen bank deposits growing at 10.24% YoY while loans and leases at all commercial banks remain at negative growth at -2.3655 YoY.
Let’s hope that the US avoids going into economic lockdown … again … like the UK and Europe have done.
John Burns consulting has this interesting chart showing a slight slowdown in home price growth. But HPI growth is still growing strong. At 17% YoY in June.
The Case-Shiller National home price index, growing at 14.6% Yo is lagged with reporting only as of April. But you can see the slowing M2 Money Stock YoY. Although M2 Money stock is still growing at a sizzling 13.84% YoY as of May.
So if John Burns is correct, then we should see an increase in the next Case-Shiller report for May, then a slight slowdown in Case-Shiller’s June report.
But if we look at new home prices (net of incentives), we see a 20% YoY price increase (Source: John Burns)
And the housing pump is primed with the lowest REAL 30-year mortgage rate since 1975.
Since the Covid outbreak of March 2020, The Federal Reserve entered markets in force, spiking their assets purchases and continually expanding their balance sheet.
Consequently, stock and bond market volatility (as measured by VIX and MOVE) have been repressed.
But commodities are a different story.
Crude oil futures are tracking The Fed’s balance sheet pretty closely while coffee “Arabica” futures have soared since July 17th. On the other hand, lumber futures prices have declined considerably since spiking in early May. Steel rebar prices have risen dramatically since mid-December 2020, a month before Biden’s inauguration as President.
Now, that’s volatility.
Home price growth jumped from 4.28% YoY pre-Covid to 14.59% after Fed intervention.
I was reading the usual pundits talking about massive increases in housing coming onto the market, then I saw today’s existing home sales numbers from the National Association of Realtors.
US existing home sales were up 1.38% in June from May, but up 22.85% YoY.
But the scary numbers were median price of existing home sales YoY printing at +23.4% while EHS inventory increased to the highest level … in 2021 but 2021 is sill lower than anytime since 2000. Maybe July’s numbers will show that incredible spike.
Existing home sales were largely in the South, then Midwest, then West and finally the Northeast.
But look at distribution of EHS prices. Houses in the $100K-$250K range (green line) are rapidly vanishing while houses in the $500K-$750K (pink line) are rapidly increasing.
Is this the new normal for banking? A big 4 bank actually had a huge upside earning … on declining lending??
Yes, Wells Fargo had a 41.44% earnings surprise on July 14, 2021.
Wells Fargo Earnings Per Share (EPS) plunged during the March 2020 Covid outbreak, but has been recovering … in terms of EPS and share price.
Wells Fargo is seeing booming deposits (green) at virtually zero deposit rates while loans have fallen (green). The recent widening between deposit and loans is in the pink box while the general widening has taken place since Q4 2010.
Total loans to total assets (white) has been falling since The Financial Crisis and housing bubble burst.
Wells Fargo’s total risk based capital ratio dramatically increased after the financial crisis, as it did for all banks.