2023.43 - Propaganda
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IMHO
"Time to buy bonds" says Barron's
Oh boy…
— Otavio (Tavi) Costa (@TaviCosta) October 28, 2023
Barron’s cover today:
“Time to buy bonds” pic.twitter.com/Hn3FrBSaqd
And indeed, many in the market seem to be doing just that (TLT is a long-term bond ETF). Is Barron's right?
$1.1b inflows into $TLT yesterday.
— VOLMAN (@volmancapital) October 26, 2023
Second largest of year.
OCT flows $3.2b , YTD to $20b.
Crushing it's all time annual record. pic.twitter.com/PHsUuJXD6J
Before diving into a closer look at the current dynamics of the US Bond market, I recommend reading this (long) post on propaganda —I provide a summary below if you don't want to read it. It's widely applicable to the current state of affairs.
12 thoughts from Propaganda (1965) by Jacques Ellul
— Jash Dholani (@oldbooksguy) October 24, 2023
You'll never look at news the same way again...
1. Breaking news is brainwashing you. Ellul: "To the extent that propaganda is based on current news, it cannot permit time for thought or reflection." When everything is urgent,… pic.twitter.com/RrurDF3xX0
Breaking news is brainwashing you by forcing you to “remain on the surface of the event” as presented by the echo chamber of your group.
As "one thought drives away another” old facts are chased by new ones and you are not given a chance to stop and reflect. Life is reduced to a series of unconnected moments, clear thoughts are replaced by vague feelings
Reading is not the same as thinking, the authority of the printed word convinces without opposition when intelligence is not exercised.
Once someone begins acting on propaganda they are obliged to believe in it, as it gives them plausible deniability to justify actions they'd otherwise deem unjust or absurd.
Propaganda relies heavily on a group’s fundamental myths, beliefs and symbols, using them as levers to trigger behaviors and works best when it’s indirect. “You can’t tell people what to think, but you can tell them what to think about”.
Lonely, depressed people facing uncertainty are the ripest targets for propaganda.
So, what does propaganda have to do with the bond market?
What the recent record inflows to TLT suggest is that the market believes the strategy that worked for the past 40 years will keep on working indefinitely (this cycle will play out like other cycles). They are failing to take into account the objectively weaker economic health of the US currently vs previous cycles.
Must Read Quote
— Preston Pysh (@PrestonPysh) October 28, 2023
From Luke Gromen 🚨
“Many investors appear to be operating under a misapprehension that this cycle is just like all the previous cycles in their career, even though the FED has *NEVER* tightened with debt/GDP at 120%, deficits/GDP at 6%, or US Net international…
"The US is the strongest" may or may not be relatively true (other economies might well be more fragile, which is like having the least bad house in a bad neighborhood), but it is absolutely not in good shape.
You may recall last week's statement from Secretary Yellen saying the US could "certainly afford two wars" lol, no it can't.
The stronger "GDP growth" the US has shown, seems to be coming from rapidly rising deficits, which are now unsustainable. The debt has overtaken the GDP "with authority" and The Fed has not yet digested all the bad debt its had to absorb starting with the 2008 crisis.
Again, just for giggles...
— CH (@Econimica) October 26, 2023
US GDP (annual #) minus US federal debt (total #) set against YoY change in working age population (blue) and Federal Reserve balance sheet (yellow). pic.twitter.com/MBOhaB2Bt1
In fact, some —including Mr. Market— argue the US economy is starting to look like an emerging market.
"An unlikely aberration has taken place in global bond markets for the first time on record: yields on emerging-market bonds in local currencies have fallen below US Treasuries."
— Luke Gromen (@LukeGromen) October 27, 2023
Non-sequitur. pic.twitter.com/cAS0GvlMDO
The above is one of those "good news / bad news" scenarios.
The good news is this will probably increase much-needed appetite for US debt —why would I buy 3rd world debt if they offer the same returns as US debt?
The bad news is that US debt has not only entered emerging market status, it's also deteriorating rapidly towards a debt spiral crisis, a phenomenon Emerging Markets are well acquainted with, but is very foreign (for many, literally unthinkable) phenomenon for US investors —witness them piling on to TLT.
If this path doesn't change —and at the moment there's no indication it will— the math can get bad enough the market could refuse to buy any more US debt at any price, according to American financial policy expert Charles Calomiris:
"…current planned deficits based on entitlements and other planned expenditures are already putting us in an unsustainable situation, which means that there’s no interest rate at which we can sustain those deficits going forward.
So it’s really not a question of what the interest rate’s going to be, but at some point people will recognize that at no interest rate will they be willing to accept further government debt issues."
—Charles Calomiris on CNBC, 10/23/23
To add insult to injury, these dynamics (like higher rates) weaken other currencies against the USD, forcing other nations to defend their currency, like the Yen, which hit JPY150 for USD1 and was promptly smacked lower.
JUST IN: The 🇯🇵 Japanese Yen is currently at its lowest value against the 🇺🇸 US Dollar in 33 years 😱 pic.twitter.com/boJxpEXal8
— Bitcoin News (@BitcoinNewsCom) October 26, 2023
How did they stop the devaluation? By using USD proceeds from the sales of US Debt and USD-denominated assets, same as China.
Sales of USD assets to defend Yuan.
— Peruvian Bull (@peruvian_bull) October 20, 2023
Not because they want to, but because they have to. pic.twitter.com/KiZ7mWMYYt
Both Japan and China have considerable reserves of USD denominated assets, forced sales of these would mean unwanted heavy competition for all the new debt the US needs to issue.
Where do people escape to when bonds are doing poorly?, historically gold (today gold and Bitcoin).
Gold is now only 2.5% from a historical triple-top breakout.
— Otavio (Tavi) Costa (@TaviCosta) October 27, 2023
Keep in mind:
The metal has already reached all-time highs in 6 major currencies:
Euro
British Pound
Chinese Yuan
Australian Dollars
Japanese Yen
Korean Won
The US dollar is the next one in line. pic.twitter.com/SR52KMuke5
To summarize
You can believe the government and its mouthpieces (all is well in 'Murica) or you can believe your lying eyes (and basic math). The dynamics at play are very complex, most of the sources I read agree on the final outcome: massive printing of new money and massive inflation. The one thing pretty much no one agrees on is the timing for this to play out.
Trying to time the market is the surest way to outsmart yourself. Ask Isaac Newton:
How tough are financials markets ?
— The Great Martis (@great_martis) October 27, 2023
Even geniuses (Sir Isaac Newton etc ) get it wrong . pic.twitter.com/pcSUen1aME
If you are willing to be wrong for the next two years in order to be right for the next twenty, Bitcoin still looks like the best bet.
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Bitcoin News
Sold
Cathie Wood's ARK sold all of their Grayscale shares. This is interesting because we know Cathie is a massive Bitcoin bull, and there's a reasonable chance Grayscale wins its appeal to become an ETF. So why did she sell?
Was it to seed their own ETF or perhaps to create some distance between ARK and Barry Silbert's DCG —which seems to be in serious legal trouble as mentioned in last week's Newsletter. Perhaps it's something else altogether but if I were a betting man, I'd bet it's to distance her fund from a ship heading into a storm.
Cathie Wood's ARK offloads @Grayscale Bitcoin Trust shares. The Trust makes up over 10% of ARK's Next Generation Internet ETF.https://t.co/1wqf5xQWBV
— Cointelegraph (@Cointelegraph) October 24, 2023
Coming?
"Institutions are coming" has been a long-standing meme in Bitcoin since at least 2017. During the 2020 cycle we got the first taste of that with one institution (Microstrategy) and one government (El Salvador) betting big and a number of others dabbling and testing the waters.
I don't think JPMorgan is right about this one —I certainly wouldn't trust anything Jamie Dimon has to say as a general principle— but also, in my experience institutional investors don't move the price. They spread their buys steadily and stealthily. The pump comes after their purchase makes the news.
Regardless of the players behind this modest little rally, I do believe the institutions are coming this next cycle. Not all of them (or even most of them) by any stretch, but enough of them.
NEW: Recent #Bitcoin rally was fueled by institutional investors, per JPMorgan pic.twitter.com/04b5Nr0NfI
— Bitcoin News (@BitcoinNewsCom) October 26, 2023
Seen Worse
Bitcoin is complicated, it's true. But —price volatility aside—it's remarkably sturdy and stable in its operation.
As last week's Lightning exploit revealed. trying to improve on some of its features with Layer 2 solutions, is a mixture of delighted awe (it's beautiful when it works) and hair-pulling frustration (who knew it would be complicated to make instant, trustless, decentralized money work properly).
...since watchtowers can unilaterally respond to expired commitment txns, but not preimages.
— Hugo Nguyen (@hugohanoi) October 23, 2023
The victim needs to respond to that threat on the spot.
The timelock delta also lasts only as few hours, so if the attacker can keep the victim offline during those hours, he wins.
But in reality, money in general is complicated and fiat —not to mention the financial apparatus it needs to function— is horribly, mind-numbingly complex. You just haven't felt the need to understand it
"#Bitcoin is too complicated."
— Vivek⚡️ (@Vivek4real_) October 25, 2023
Ok, explain USD to me. pic.twitter.com/eBXk2RZxE0
ETF YO-YO
Last week IBTC —the ticker for Blackrock's Bitcoin ETF— appeared, disappeared and reappeared in the system of the Depository Trust & Clearing Corporation.
Stop trying to guess the nanosecond the ETFs will be approved, it's coming maybe next week, more likely next year. Stack accordingly.
JUST IN- BlackRock's iShares #Bitcoin Trust is now re-listed on the Depository Trust & Clearing Corporation $IBTC pic.twitter.com/v6kexIOIOL
— Bitcoin Magazine (@BitcoinMagazine) October 24, 2023
Speaking of the ETF, this is your reminder NOT to buy the ETF, which is "paper Bitcoin". If history has taught us anything about "paper bitcoin" it's that it ends very badly. I'd be surprised if they don't do their best to silently create fractional reserve Bitcoin which will eventually require pushback.
What if the ETF is the death of the Bitcoin ideals?
— GANDALF (@BTCGandalf) October 23, 2023
1. Majority of Bitcoin held by third-party custodians (not in self-custody).
2. Bitcoin supply cap artificially increased through the issuance of paper bitcoin in surplus of reserves.
Are you prepared for this?
Don't take a dumb risk, buy Bitcoin and move it to a wallet where you control the keys.
Slow Down
Coinbase has set a $5k per week limit on withdrawals. We will bang the drum again: Get your coins off exchanges!
. @Coinbase is limiting bitcoin withdrawls. I just tried to send BTC from Coinbase to my cold wallet, and encountered a NEW $5k/wk withdrawl limit policy (implemented 10/13). I've been a Coinbase customer for 10 years. GET YOUR BITCOIN OFF EXCHANGES!!!!
— Colin Brown (@thecolinbrown) October 23, 2023
Means Pump
I'm not a trader, have no intentions of becoming one nor recommend trading Bitcoin. But for those of you that "understand greek" (I don't) here's a trader's explanation for why Bitcoin was primed to pump to the upside.
options market makers in #bitcoin are increasingly short gamma as BTC spot price moves up.
— Alex Thorn (@intangiblecoins) October 23, 2023
when you’re short gamma and spot px rises, you need to buy back spot to stay delta neutral.
this should amplify the explosiveness of any short-term upward move in the near term. more 👇 pic.twitter.com/J0satUAilk
and here's a more human-readable version of a similar analysis. TLDR: Hodlers set the floor, Bears (betting BTC would drop) got squeezed.
The latest edition of The Week On-chain is live folks, covering the prevailing #Bitcoin rally to $35k.
— _Checkɱate 🔑⚡🌋☢️🛢️ (@_Checkmatey_) October 24, 2023
This is a great example of a what happens when:
- The floor is put in by the spot market (visualised using on-chain analysis).
- The rally that follows is fuelled by the… https://t.co/ld3eKErpdQ
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"Crypto" News
The jokes often write themselves
VERY
As the FTX circus continues, little question remains about the intent behind the fraudulent casino, we already know they were bad. The question is really "just HOW bad was it?
“FTX wasn’t a good business helmed by a bad leader, the prosecution is arguing, but something much worse: a crypto casino that fueled a criminal enterprise from its 2019 inception, providing billions of $$ in new capital that could be siphoned to Alameda.” https://t.co/VvRBuztsaE
— Tolu Ogunlesi (@toluogunlesi) October 22, 2023
One bit of good news is that customers might receive a good chunk of their money back. Given that ONE of their investments is going well (Anthropic) they may not get completely fleeced.
As @FTX_Official liquidators pick apart the company's bones, a pending deal could give former customers of https://t.co/Sx8SUGGtFT as much as 90% of the assets.@jesseahamilton reportshttps://t.co/nlN1gJk1jI
— CoinDesk (@CoinDesk) October 23, 2023
Hexxd
Hex —and pretty much anything Richard Heart touches— is an egregious scam. The problem is, Richard is smart and actually understands Bitcoin. In fact he understands it well enough to know most people don't, so he has silver tongued his way into launching "better alternatives", to his Room-Temperature-IQ Army of followers (which he's probably dumping on right now). On alternating days I find this sad and hilarious.
Who the phuck keeps selling $HEX?
— 𝓚𝓪𝓽𝓲𝓮𝓮𝓟𝓒𝓻𝔂𝓹𝓽𝓸.𝓹𝓵𝓼 (@KatieePCrypto) October 27, 2023
Didn’t y’all hear Richard saying $BTC could drop with stocks today?
We want to outperform here boyz! pic.twitter.com/skkfRSi7Zq
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Fiat News
Housing
The dream of house ownership keeps receding for young americans
Here is the gap between median income and income needed to afford a house.
— The Kobeissi Letter (@KobeissiLetter) October 28, 2023
It's more than DOUBLE the gap seen in the 2008 crisis.
No wonder mortgage demand is at its lowest since 1995.
How can this end well?
Follow us @KobeissiLetter for real time analysis as this develops. pic.twitter.com/7Gnq3yeW8Z
and credit card debt delinquencies are mooning
Credit card delinquencies are exploding higher… pic.twitter.com/wFe7DD1KF1
— Pomp 🌪 (@APompliano) October 29, 2023
and Google searches for "give car back" are at an all-time high.
Wow -- thought this was fake (it's not)
— CarDealershipGuy (@GuyDealership) October 30, 2023
"give car back" searches at all-time high. try it yourself. pic.twitter.com/xwf6Mg1IcG
Market Down
I find it unsurprising the SP500 —which is essentially being held up by only 7 companies — fell below its 200 day Moving Average,
NASDAQ also entered correction territory (plenty of room below, IMO).
BREAKING: The S&P 500 has officially entered correction territory, now down 10% from its July high.
— The Kobeissi Letter (@KobeissiLetter) October 27, 2023
This means that the market is now down 10% from the exact date the Fed removed a recession from their forecast.
The S&P 500 has lost over $4 trillion in market cap since July.… pic.twitter.com/QYT4800B4x
How are banks doing?
Bank stocks are getting crushed right now with Bank of America leading the way down. pic.twitter.com/yDNcA27Lqx
— TFTC (@TFTC21) October 27, 2023
Not great. Makes it all the more heartening to see BTC outperforming.
#Bitcoin decoupling from the Nasdaq, S&P 500, and Dow Jones this month pic.twitter.com/iNGWHUDOcM
— Bitcoin Magazine (@BitcoinMagazine) October 26, 2023
Dumping
Like I mentioned in the IMHO section, China recently dumped some of its USD assets to defend the Yuan, but that was not all.
China sells the most US assets in 4 years, dumping $21 billion of US stock and Treasury bonds, per BI.
— unusual_whales (@unusual_whales) October 23, 2023
Unusual activity in China —like approval for a new 1 Trillion Yuan bond issuance and Uncle Xi's first-ever visit to the central bank— suggests they closer to a recession than they let on
China's real estate index is officially back to 2009 levels, down ~80% from its all time high.
— The Kobeissi Letter (@KobeissiLetter) October 24, 2023
Today, Chinese President Xi visited the Chinese central bank for the first time ever.
Shortly after, China raised its fiscal deficit ratio from 3.0% to 3.8%.
China also just approved… pic.twitter.com/q5Ls7u5soo
None of this however, has stopped the from moving forward with their digital Yuan
NEWS: PetroChina reportedly settled a trade for a million barrels of crude with digital yuanhttps://t.co/uvlvLsOukW
— Blockworks (@Blockworks_) October 23, 2023
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Dystopian News
Missed the Barn
Last week the Wall Street Journal published an article claiming Hamas had received up to $90 million in funding through Bitcoin. That number turned out to be 99% wrong.
BREAKING: 🚨 Senator Hagerty challenges @WSJ's terror funding figures tied to #Bitcoin, quoting a source estimating WSJ ‘numbers’ were inflated by a whopping 99%.
— Simply Bitcoin (@SimplyBitcoinTV) October 26, 2023
pic.twitter.com/0TNFZ7HGga
Current estimates of illicit activity in Bitcoin are somewhere around 0.25% but I'm sure that won't stop Elizabeth Warren from rallying her "Crypto Army" against Bitcoin.
Coming Soon
What does rampant inflation feel like? It's impossible to describe but the picture below speaks volumes.
We just landed in Argentina and exchanged $400 US Dollars of Bitcoin into Pesos.🇺🇸🇦🇷
— CoinBeast (@coinbeastmedia) October 27, 2023
2023: $400 USD = 4,350,000 Pesos.
2013: $400 USD = 1 x 2000 Peso bill.
The exchange rates have changed DRAMATICALLY in only 10 years.🚨
✅In 2013 1 USD = 5 Argentine Pesos
❌In 2023 1 USD =… pic.twitter.com/H6guheNZjY
Poison
How long before the detrimental effects of the vaccine are admitted publicly and the WEF and WHO are held accountable?
WOW — Pascal Najadi, the son of WEF co-founder Hussain Najadi, is calling for the arrests of Bill Gates, WHO leadership, the WEF, Klaus Schwab, Big Tech and Pfizer.
— Ben Swann (@BenSwann_) October 27, 2023
He says he and his mother are now dying from the vaccine, which he calls “poison”. pic.twitter.com/L9EPkMxMA4
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Price News
BTC Surfing
Bitcoin jumped hard last week and managed to peek its nose above the Sand ($33.7k), will it manage to stay above?
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Dip Fishing
Bitcoin managed to hold most of the pump from the beginning of the week. Holding in the $34k to $35k range, I had to go back a bit and found some support between $32k and $33k, but not a ton.
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Calm Chart
Pumptober looking to close green
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