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How long do Animals live?
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highlights
Fed probably has the votes to cut
Current Views
Flat
Fed Voters
Based on Williams’ dovish comments today, here are my updated vote probabilities for each Fed voter. This makes it look like they will cut in December. These probabilities are conditional on Powell, because he can get Barr and Goolsbee onside. Even at 16bps, receiving December FOMC makes sense.
Meanwhile, the BOJ meeting will be interesting as the weak JPY and loose fiscal approach from Takaichi is making the powers that be a bit nervous in Japan. Ueda sounded more hawkish last night.
USDJPY
Here’s my updated USDJPY intervention grid. 159/160 the red zone.
USDJPY intervention data from: https://fred.stlouisfed.org/series/JPINTDUSDJPY
Stocks and bitcoin
Yesterday’s price action wiped out the remaining short-term bulls, including myself, as we had two shots of good news for stocks (NVDA and NFP) and horrendous price action. While the current reversal in stocks started with unwinds of the retail favorites, yesterday’s action in NY time did not look like panic retail selling or margin calls (selling that normally comes in abrupt waves), it looked like a bunch of institutional VWAPs battling for who gets to sell first. The slope of the NASDAQ selling was perfectly 45 degrees all day.
Bitcoin, in contrast, was sometimes a grind and sometimes featured massive stopouts of leveraged longs.
We are nearing Michael Saylor’s average price for bitcoin, as the pattern has been for him to buy small clips on dips and massive clips on rallies. There is nothing meaningful about BTC going below his breakeven, but it is an interesting situation to watch. Note that bitcoin has gone below his breakeven in the past, see 2022.
Bitcoin purchases by MSTR (larger bubble = more bitcoin)
The dotted red line shows MSTR’s DCA. The procyclical nature of bitcoin treasury companies is fully obvious now, if it wasn’t obvious six months ago. They buy high and now some of them are selling low. The rubber does not hit the road for Microstrategy until they need to start paying dividends and rolling debt into a market that finds the whole scheme less humorous than it did when Wall Street and U.S. government support offered a bullish narrative. The question of who will possibly be the marginal buyer of crypto at this point is very hard to answer. Maybe some of the whales that sold above 110k will be on the bid at 75k? It’s possible. More likely is that most whales see that crypto no longer has anything to do with the original vision and so they are happy to hold their billions of dollars in a currency that is stable and can be exchanged for goods and services. Let’s see.
For perspective, the biggest past drawdowns in bitcoin have been in the 75%/80% area, so if we are in crypto winer again, the 25,000/32,000 area would be the most extreme target. I am not saying we are in crypto winter. Just offering a reminder that 75%/80% drawdowns have been part of the game in BTC.
Today
Williams has thrown the market a lifeline and put the December cut back on the happy side of 50/50. Today’s close will offer an idea of whether we are still in good news/bad price like yesterday, or the bears have burned themselves out.
We got a clean break of the 23300/23400 level I had been touting for a week or so. A close below keeps the bears in control while a close above 23400 raises some question marks as to whether we’ve done enough.
Final Thoughts
This chart from Apollo shows an epic regime change. It reminds me of when US energy exports crossed from net import to net export. A critical macroeconomic reality that was true throughout our whole lives is no longer true.
Have an animalistic weekend.
How long do Animals live? From Compton’s Pictured Encyclopedia, 1943
