the 3rd Week of May 2021 Thoughts
Updated: Jun 8, 2021
ESG | ESG | ESG Matters
thoughts as we finish this 3rd week of April 2021
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When can we stop talking about crypto and start talking about stocks? Jim Cramer…Booyah Founder
This week the perfect storm blew in: consumers have extra cash and low debt levels. The CPI is coming in ahead of expectations and the I word: Inflation…was on the cover of Barrons. Commodity, agriculture, and land prices are higher than in the last 10 years BUT still…the FED is sitting at 0% in the Fed Fund Rate.
Inflation accelerated at its fastest pace since 2008 last month with the Consumer Price Index spiking 4.2% from a year ago. Excluding volatile food and energy prices, the core CPI increased 3% from the same period in 2020 and 0.9% on a monthly basis.
“The markets have been hovering around all times highs with a lot of the reopening trade already priced in. So it’s not out of the question that the outsized inflation read could bring us back down to earth a bit,” said Mike Loewengart, managing director of investment strategy at E-Trade. “The Fed has made it clear that it won’t let inflation sway it from its easy money policies jumps like this.”
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My kids watched the 1981 release of Clash of the Titans til they wore the tape out and my grandsons are as mesmerized by this year’s “Godzilla vs. Kong.” There is a real-life-monster-battle going on as Elon Musk inflicted $300 million worth of damage on Tesla when he tweeted that the electric vehicle maker won’t be taking Bitcoin as payment anymore because it isn’t green enough. Tesla announced it made $1 billion when it sold some Bitcoin in the first quarter which boosted its per share earnings.
Musk’s words pushed crypto down by 10% on Monday alone and Tesla took a $2.5 billion hit as of March 31, bringing to light the “quirk” in crypto accounting. As an intangible asset, gains come only on sales and losses come when the price drops below the purchase price and then every drop below the new carrying value 😲 Why does this matter to you? Threats to making money in crypto have been having your coins stolen; regulatory changes and the tax treatment. This week both regulatory and accounting realities hit the market: China and Hong Kong are limiting who can buy crypto.
A picture is always worth a thousand words: interest rates are on the move, as this chart shows:
😲 Why does this matter to you? Rising rates are good for investors who are looking to put money to work in their bond portfolios, BUT the value of bonds you already own will decline. Don’t worry too much about this!