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David Fuller and Eoin Treacy's Comment of the Day
Category - Precious Metals / Commodities

    Citadel Silver Holding Exposes Rifts in WallStreetBets Army

    This article by Anna Kitanaka for Bloomberg may be of interest to subscribers. Here is a section:

    Ken Griffin’s Citadel has once again found itself at the center of a WallStreetBets drama, this time over the firm’s holdings of silver.

    The precious metal has become a popular buying target for retail investors keen to inflict losses on hedge funds, after posts on WallStreetBets claimed the market was ripe for a short squeeze. Yet some members of the Reddit forum have responded with pleas to avoid the trade, saying Citadel stands to benefit as a major holder of the largest silver exchange-traded fund. “CITADEL IS THE 5TH LARGEST OWNER OF SLV,” one WallStreetBets user wrote on Sunday, referring to the iShares trust’s ticker symbol. “IT’S IMPERATIVE WE DO NOT ‘SQUEEZE’ IT.”

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    Speculative Frenzy Spills Into Crypto as Bitcoin Tops $38,000

    This article by Yakob Peterseil and Joanna Ossinger for Bloomberg may be of interest to subscribers. Here is a section:

    Musk’s page on Twitter simply said #bitcoin with no further explanation, but speculation that the world’s richest man might be a Bitcoin investor was enough to set off the dramatic rally.

    Prices spiked in a matter of minutes, for the biggest intraday move in almost a year.

    “This huge melt-up is due to Elon’s tweet,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, which bills itself as the world’s biggest crypto lender. Musk’s
    support for Bitcoin “creates a safe zone for some of the smaller companies and possibly everyone in the S&P 500 to allocate into Bitcoin,” he said.

    Musk also tweeted an image of a “Dogue” magazine cover featuring a whippet in a red sweater -- a play on the fashion magazine “Vogue.” He also sent posts calling Cyberpunk a great video game and said, “In retrospect, it was inevitable.”

    Binance, the world’s largest cryptocurrency exchange by volume, briefly suspended withdrawals on Friday to address a large increase in requests. Chief Executive Officer Changpeng Zhao said that user sign-ups and trades jumped to a record high. “We almost ran out of DOGE coin addresses,” Zhao told Bloomberg. “Our system couldn’t generate new addresses fast enough to match new users coming in. It’s crazy.”
     

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    Soybeans Buoyed as China Turns to U.S. for Nearby Supplies

    This article from Bloomberg news may be of interest to subscribers. Here is a section:

    China is looking for more U.S. soybeans after top exporter Brazil suffered from a drought that delayed planting and now downpours that slowed harvesting. The Asian nation needs so much of the oilseed to feed a growing pig herd that it already bought supplies for delivery in August, at the end of the U.S. season, and for 2021-2022.

    China’s interest in nearby U.S. supplies comes after Chicago soybean futures slumped more than 7% last week, or over $1 a bushel, the worst performance in more than six years. Crop prices recouped some of their losses on Monday, but remain well down on their multiyear highs earlier in January.

    Corn futures in China are also down from record highs this month, tracking Chicago prices and pressured by sales from state wheat stockpiles. In terms of South American supplies, Brazil is heading for a record soybean crop after rains, while dryness is still threatening the production outlook in Argentina.

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    Email of the day on gold as a Tier 1 asset under Basel III

    You mentioned that gold should be higher. I understand that there is effectively a "put" on gold, die to shorts being able to be placed - using unallocated gold - which are naked. But that the Basel 3 Accord which should be in place in June will reduce unallocated gold to a tier3 asset.

    Gold I understand being elevated to a tier 1 asset (as for cash).

    This surely means that the demand for physical gold (already in demand with orders not being filled) will surely surge.

    Are we therefore positioned to make a killing on gold between now and June?

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    Deflation Threatens to Push Yen Higher on Japan Real Yield Gain

    This article by Chikako Mogi for Bloomberg may be of interest to subscribers. Here is a section:

    “Japan’s real yields are high and are rising with deflation underway,” said Tohru Sasaki, head of Japan markets research at JPMorgan Chase & Co. “The real yield gap widening in the negative is very significant. It may eventually drag the yen higher.”

    Consumer price growth in Japan excluding fresh food -- a measure closely watched by the country’s central bank -- has been negative or zero since April. Expectations for future inflation -- derived from 5-year breakeven rates -- sit at minus 0.12%. Equivalent U.S. breakevens are at 2.16%, up over 60 basis points and rising since November, as investors bet further stimulus under new President Joe Biden will help reflate the American economy.

    Yen at 100
    The result is a higher real yield in Japan, where 5-year inflation-protected notes trade around zero versus minus 1.73% in the U.S., increasing the relative attractiveness of the country’s bonds and its currency.

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    Email of the day - on the early stages of a secular bull market.

    Until the beginning of last year you often spoke on the theme of the early stages of a secular bull market. David had begun speaking about it as long as 4 years ago. But with the onset of the pandemic, you have been largely silent about it. Has it stalled or, in your view, already peaked?

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    Email of the day on financial repression:

    Thanks so much for the terrifically informative analysis that you continue to provide. The quality of your work is simply jaw dropping at times. But I wonder if you could please clarify one thing. Would you mind defining more clearly what you mean by the term “financial repression”? I can certainly search this, but I’d like to know what it means to you.

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    Russia May Raise Wheat-Export Tax, Stoking Grain Supply Worries

    This article by Megan Durisin and Yuliya Fedorinova for Bloomberg may be of interest to subscribers. Here is a section:

    Russia may almost double a planned levy on wheat exports and impose new restrictions on barley and corn in an effort to curb food prices, heightening supply risks for global grain markets.

    Officials in the world’s top wheat shipper will meet Friday to review grain-export duties and may increase a planned tax on shipments to 45 euros ($55) per ton from March 15, a spokesman for the Agriculture Ministry said. That compares with a 25-euro levy approved last month for sales from mid-February through June, as well as a quota on grain shipments.

    The moves come after President Vladimir Putin’s call to cool food-price inflation because of sharp increases for staples like bread and sunflower oil last month. The threat of heightened restrictions from a major exporter helped stoke wheat futures in Chicago and Paris, and adds to concerns of crop
    protectionism as grain prices rise.

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