Financial Instability, Liquidity Drying Up, Alarm Bells Ringing: TBL Weekly #14
Our free weekly markets analysis, recapping the action in bitcoin and macro.
Welcome to TBL Weekly #14—here are the week’s highlights!
Our monitor for the week ending Saturday, October 1st, 2022:
Markets continue exhibiting signs of stress as the Fed doubles down on quelling inflation. We believe the Fed is not necessarily blissfully unaware of the havoc it could cause, but rather accepting of particular fates. We also believe that unforeseen scenarios will rise that will force them to, well, pause and reassess what it has done.
Japan is (now but pretty much always) on yen intervention watch, England staved off a wave of pension fund margin calls by emergency-purchasing long-dated gilts, and the strong dollar is a real danger for the world. Rates are tearing through 15-year highs in the US. If there is not a course correction soon, and even if there is, troubled waters lay ahead.
Rising financial instability is threatening the global economy. What is going to break at the mercy of the dollar and associated tighter financial conditions next: another sovereign, or perhaps a major financial such as Credit Suisse? A systemic unwind of an investment bank with sprawling roots like Credit Suisse could spur a domino effect of delinquencies around the globe with associated creditors. Right now, Credit Suisse default protection is more expensive than prior to the Great Financial Crisis:
Expect cracks to appear more frequently as the Fed’s “higher for longer” hiking mission persists. The Bank of England intervention was a hint of what lies ahead, and a tap on the shoulder from a major financial firm, either directly or via ECB President Christine Lagarde by proxy, would be the end of tightening in our opinion. The Fed wants to focus on inflation by itself, but dangers creep from hard-to-see corners of the financial system.
Continue reading our markets update about rising instability in yesterday evening’s free markets analysis. Markets are moving fast—this post has everything you need to get up to speed:
September 30th Global Macro Update
The last chart for today is our confluence price, a combination of three bitcoin valuation models to indicate fair value. Bitcoin trades slightly cheap, using our TBL Fair Value Ratio:
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To round out the day, here are your quick links to all of the TBL content for the week:
Nik & Joe recap September’s market action two days after the Fed’s decision on September 21st. Interest rates skyrocketing, equities hanging on by a thread, and our outlook heading into a tense Q4:
Nik breaks down the emergency intervention on behalf of UK pension funds by the Bank of England. It was another example of “too big to fail,” as BlackRock looks to be the primary beneficiary of this week’s action.
We suspect these themes of fragility and intervention to continue playing out over the coming months. Get caught up so you’re oriented for the next major market event:
Nik discusses the BoE bailout of BlackRock in video form. Don’t miss our most viewed markets video ever:
Nik & Joe take you through the global macro landscape in an all-encompassing update. Fragility is the theme across all markets. As soaring yields threaten the world’s financial plumbing, a slowdown could turn into a severe economic contraction:
Have a great weekend everybody!
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