It has been a very volatile day in almost every market - mostly coming on the back of some semi-assurances and quasi-promises (is that even a word?) from the people in power.
In my last briefing, I talked about the rising energy prices. After gas prices rose about 60% in two days, Russia confirmed it would send record amounts of natural gas to Europe this year. Global energy prices dropped on this news.
While President Biden was hosting a meeting yesterday with some of the biggest corporate and banking leaders, describing the consequences of a debt default to the American public and rest of the world, the Republicans floated an offer that would extend the debt ceiling deadline to December. Stocks rallied on this news.
While the script may play out slightly different every year, this is a movie we all have seen many many times. When people like Janet Yellen make statements of gloom and doom if the debt default scenario is not sorted out before 18 Oct, she is really insulting the intelligence of the common man.
In the modern world thus far, when anything that has threatened the stability of the global financial system has come up, all have joined together to solve the problem.
Remember almost a decade ago, we had the Greece sovereign debt crisis. The smallest country in the European Union threatened to destabilize the world. Immediately, the major global economic powers stepped in to finance their rescue facilities and support the Euro. When you are building a sand castle, you have no idea finally which grain of sand will bring the castle down. So the proponents of this game are all on one side in times of a crisis.
Remember they even use the same lines: Famous lines from Mario Draghi the former ECB president during the crisis was “whatever it takes”. We heard the same refrain from Jay Powell many times whenever he wanted to give further assurance to the markets. So the game will go on and as participants in the markets we have to play along too. Remember this: No one has made any money betting on the end of the world. At least as yet as we are all still here.
Finally, the cryptocurrencies had the biggest lift this week so far, with the help of the two major lawmakers. The move was mainly led by Bitcoin. Testifying before the House of Representatives yesterday, SEC Chairman Gary Gensler confirmed that the regulatory agency was not looking to ban the use of Bitcoin. This follows similar recent comments from the Fed. Last week, Fed Chairman Jay Powell said the central bank would not ban cryptocurrencies.
These comments from two of the most notable figures in the US financial system are taking away some uncertainty around the regulatory landscape for Bitcoin and other altcoins. After all, Elizabeth Warren will not just have her wish fulfilled. Bitcoin has moved up 33% in just one week and it may be setting itself for an exponential move up. So if you are already long Bitcoin, you may want to stay long. I will have much to write about it in the coming days. So stay tuned.
So, there we go. Thanks for reading Breezy Briefings. If you enjoyed this, I'd really appreciate if you could take a second and tell a friend. Honestly. It makes such a big difference.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.