This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron’s.
Dubai Dinner Notes
Stray Reflections
March 28: Since Jan. 10, following the approval of 11
spot ETFs, their combined assets have surged to over $50 billion, nearly half the assets held by gold ETFs.
There are 1.35 million Bitcoins to be mined in the next 116 years, and the new exchange-traded funds have accumulated 340,000 in 10 weeks.
In April, the Bitcoin halving is expected to reduce the fresh supply paid to Bitcoin miners to 450 Bitcoins per day. The new ETFs are buying nearly 6,500 Bitcoins per day. Where will the rest come from? What we are seeing is the typical runup of Bitcoin prices into that halving event to encourage longer-term holders to take profits.
The speaker [at the dinner] pays close attention to the price of Bitcoin against its historical production cost, which provides a natural cyclical floor. The further Bitcoin’s price moves from its cost of production, the more that price is reflecting a longer-horizon view and speculative forces. It demands disciplined investing.
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Bitcoin’s price is 1.75 times higher than its cost of production, or nearly two standard deviations greater than the average of the past year, but the halving will result in a near doubling of production costs.
The speaker concludes emphatically: “Bitcoin is playing the reserve asset for the masses while gold takes center stage for institutions like central banks. Institutions are crowding retail investors out of gold, while retail investors are crowding institutions into Bitcoin.”
Jawad Mian
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Fireworks in the Corn Market
March 2024 Market Letter
Third Street AG Investments
March 28: The last business day of March is always one of the most important “report” days of the year, as the USDA [U.S. Department of Agriculture] releases both its March 1 Grain Stocks report and its Prospective Plantings report.
As often happens, the reports created some fireworks today, particularly in the corn market. The corn stocks were 80 million bushels (MB) less than analysts had expected, and corn acres were 1.75 million less than expected.
Sorghum acres were also below analysts’ expectations and are 0.8 million less than last year.
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Together, those two crops are down 5.4 million from last year. Soybean acres were up 2.9 million from last year, but the combined acres for all principal crops is projected to be down 6.3 million.
Chad Burlet
4 Worries for Stocks
Tech Morning Meeting
Piper Sandler
March 27: The liftoff in equities has been exciting, with the DJIA [
], SPX [
], and COMP [
] rallying 20% to 30% off the October ’23 lows. However, the pace of this advance is not sustainable for the following reasons:
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1) A new leg higher in equities rarely emerges when the SPX is already at the upper end of a well-established monthly price channel. From a more tactical viewpoint, our proprietary 30-day Overbought/Oversold indicator shows the SPX and NYSE are overbought and due for a pullback.
2) The SPX is nearly 13% above its 40-week moving average. Historically, the SPX rarely trades more than 15% above a 40-week MA. While this indicator does not indicate secular market tops or bottoms, it can be helpful to identify markets overdue for a healthy pullback/consolidation.
3) Market breadth is not confirming the new highs in the popular market averages. Our proprietary indicators remain in sell signals.
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4) The bullishness in investor sentiment surveys, such as AAII and NAAIM, indicates a frothiness that has preceded prior upward-momentum slowdowns.
Our SPX year-end price objective of 5,050 remains unchanged for now. We believe the SPX is vulnerable to a 5%-10% pullback/correction in the coming weeks/months. We also suspect our outlook of a High-Level Trading Range will unfold in the months ahead of the U.S. presidential election.
Craig W. Johnson, Scott Smith
Pervasive Inflation
The Collopy Letter
Carl M. Hennig, Inc.
March 26: The Fed’s reserve about rate cuts may have substance. The yield on the 10-year Treasury (the benchmark security) has quietly crept up from 2.74% in August of 2022 to 4.25% as we write. If rates continue inching up, they might be telling us that inflation may not continue its slide toward the Fed’s target of 2.0% at the same time stocks have serious competition from the fixed-income market.
Not to be apostles of gloom, but crude oil is now changing hands at $81.80 a barrel, compared with $68.56 almost precisely a year ago. And gold is $2,176 an ounce, versus $1,820 an ounce in October of last year and $1,627 in November of 2022. Is the granddaddy of inflation markers talking to us?
And Bloomberg announced, as we write, that cocoa prices have exceeded $10,000 a ton in New York. Snickers bars, See’s Candies, chocolate milkshakes, and homemade brownies should become dearer. We keep an eye on grocers’ shelves and can report that prices are at a level that implies inflation is still tracking at a 9.0% rate.
John F. Collopy
Japan’s Opportunity
Equity and Derivatives Strategy
Evercore ISI
March 26: Normalizing monetary policy and corporate governance reform have been a sea of structural change for earnings-per-share-driven Japan. All have catalyzed new all-time highs for the Nikkei 225, 35 years in the making.
Rising cost of capital, mandated “comply or explain” policies to raise corporate values, and large cash reserves incentivize corporates to use cash to magnify shareholder-friendly policies.
Households also hold large cash reserves. Reallocation to equities could support healthy domestic participation, spurring further long-term outperformance.
Julian Emanuel and Team
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