Week 4 wrap-up and marking the end of the 1st month of 2023's beginning. 11 more to go, can we keep up? Landscape changes, crypto-craze easing, stock prices rising. Is it just the year beginning luck or shall we adhere to "The year of the Rabbit", which in Chinese new year is predicted to be the year of hope? The Rabbit symbolizes longevity, peace, and prosperity. Lockdown has lifted from Wuhan to Beijing, and Chinese capital rushing to the Eurozone economy. How fast can it run? Can we keep up? Meanwhile, week 4 presented mixed market sentiments, but indicators for hope indeed. Enjoy your read, for all things global financial markets and economics. Yours truly.
'BRAZENTINA' & THE COMMON CURRENCY
Argentina and Brazil, are planning for a common currency named "Acer". The plan is presented as a way to enhance trade and economic relations between the two countries. The details of the plan and whether it will be implemented or not, have not been announced yet. It is yet, still a plan.
EUROZONE "DODGES A BULLET"
The Eurozone will avoid a recession this year, according to a survey of economists, which illustrates the sharp about-turn in global economic sentiment in the past couple of weeks. As recently as last month, analysts surveyed by Consensus Economics were predicting the bloc would plunge into recession this year. But this month’s survey found that they now expect it to log growth of 0.1% over the course of 2023. This is thanks to lower energy prices, bumper government support, and the earlier-than-anticipated reopening of the Chinese economy, which is set to boost global demand.
SILVERGATE-KEEPING BINANCE TRANSFERS
Binance's banking partner, Silvergate Bank, has announced plans to ban US dollar transfers below $100,000. The bank cited increased regulatory scrutiny as the reason for the change. Binance has been working with Silvergate since 2018 to facilitate US dollar deposits and withdrawals for its users. It is unclear at this time how Binance will be affected by this change, but it may have to find a new banking partner or implement new processes for smaller transactions.
JAPAN TRYING TO MAKE YIELDS GREAT
Japan's Finance Minister has warned of severe financial consequences if the Bank of Japan (BOJ) cannot contain rising yields. The BOJ's struggle to control yields on long-term government bonds has led to concerns over the country's finances.
ONE FOR THE BOOKS
The hedge fund Citadel, made $16 billion in profit in 2022, surpassing Paulson's previous record of $15 billion in a single year. The fund's flagship quantitative fund, Wellington, returned 58% in 2022, while its market-neutral fund, Kensington, returned 44%. Citadel's success is attributed to its use of technology and data to inform its trades. The hedge fund has $35 billion in assets under management.
SWIFT CUT TO CRYPTO
The SWIFT network has cut access to cryptocurrency exchanges in an effort to prevent money laundering and other illegal activities. The move is said to be in response to pressure from regulators and governments. The decision could have a significant impact on the cryptocurrency industry, as many exchanges rely on the SWIFT network for their banking and payment services.
YELLEN TAPS THE CEILING
The U.S. Treasury Secretary Janet Yellen is considering tapping a trust fund to keep the government from hitting its debt limit. The move would be similar to one made by her predecessor, Steven Mnuchin, in 2017. The debt limit, or the amount of money the government is allowed to borrow, is currently set at $28 trillion and is expected to be reached as early as mid-March.
TOKENIZED BY SWISS
Swiss private bank Cite Gestion has become the first financial institution to tokenize its own shares, allowing its clients to own and trade digital assets via its platform. The bank has utilized blockchain technology to make the process secure, transparent, and efficient. The move is seen as a significant step towards the wider adoption of digital assets by traditional financial institutions and may open up new opportunities for investment and asset management.
FROM RICHES TO RAGS?
India's Gautam Adani has been accused of pulling off the largest con in corporate history, involving his companies and the Indian government. The accusations include inflated invoices for power equipment imports, alleged fraudulent land acquisition, and tax evasion. His net worth has dropped as a result of these allegations. Did anyone see this one coming, as his net worth exploded alongside exploding stocks and imploding crypto (not that any of it is related? Netflix special coming up, or is the hype equally hyped as the billionaire's rise to extreme riches?
EU'S 2 PERCENTER VOTE
The EU has proposed a new law that would require banks to hold 2% of their assets in crypto or Bitcoin. This measure is aimed at increasing the exposure of banks to crypto and digital assets and encouraging them to invest in this emerging asset class. The law would also provide a framework for banks to manage and mitigate risks associated with crypto assets. The proposal is currently under review and if passed, the law would take effect in 2024. Fingers crossed?
FTX FTX'ED MAJOR TECH COMPANIES
FTX is reported to owe money to several major technology companies such as Google, Meta, Amazon, TikTok, and Apple. The amounts owed are not specified, but the report suggests that the exchange has been gaining traction and revenue in the crypto market. FTX is a (former, mind you) member of the "big four" crypto exchanges, along with Binance, Huobi Global, and OKEx. It makes one wonder, whether the major tech companies have been contagiously confined to act like VCs, after being VC'ed themselves. No due diligence, building on the frenzy, and "killing the rabbit".
BANKS PUTTING FEES ON FREE
Now for some "local" (the home of Penning) news. Banks in Denmark, have since 2020 been hit by, negative interest rates, which led to an increase in bank fees in Denmark placed on their customers. Banks have had to increase fees to maintain their profits as the negative interest rates made it more difficult for them to earn money on loans. Consequently, customers are increasingly turning to online banks and other financial institutions that do not charge as many fees.
THE CASE FOR COMMUNICATIVE LIBERTY
Morgan Stanley has hit some of its bankers with penalties of up to $1 million for messaging breaches. The bank identified the breaches after an internal investigation and reported them to the Financial Industry Regulatory Authority (FINRA). The breaches included inappropriate sharing of client information and unauthorized access to client information. The bank is said to have taken appropriate disciplinary action in each case and taken steps to prevent future breaches.
A US-based short seller, Hindenburg Research, reportedly took positions in several Asian companies, citing financial concerns and weaknesses in their operations. The companies in question have not been named, but the short seller's claims have led to declines in their stock prices. The short seller's report also included allegations of insider trading and ties to organized crime. The companies have denied the allegations and some have announced plans to take legal action against the short seller. The same short seller went after the now-scrutinized billionaire Gautam Adani for alleged market manipulation which contributed to his meteoric rise to riches. Question is, who the real market manipulator?
ELON'S QUEST FOR CAPITAL
Tesla CEO Elon Musk is reportedly exploring the possibility of raising $3 billion in debt to pay off his personal debt from his tweets about taking Tesla private in 2018. The Wall Street Journal reported that the SEC had already approved the plan, which would allow Musk to raise the funds through a stock and bond offering. The move would reportedly reduce the amount of leverage on Tesla's balance sheet, which has grown as the company has invested in electric vehicle production and solar panel manufacturing. How ironic is that the same CEO controlling others' tweets and liberty of speech is penalized for taking the liberty to tweet at will?
GOLDMAN SACHS EYES BITCOIN FOR GOLD
Goldman Sachs has found that Bitcoin has outperformed other assets such as gold, the S&P 500, and the Nasdaq as the best-performing asset of 2023. The bank's research team has said that Bitcoin's returns for the year to date have been higher than those of other assets and that the cryptocurrency has shown a level of resilience during market downturns. They also noted that Bitcoin's performance is consistent with its historical returns and that it has the potential to continue to be a strong performer in the future.
GOLDMAN SACHS SACKS GOLDEN PAYDAY
Goldman Sachs CEO David Solomon has taken a pay cut of $25 million due to the bank's recent financial struggles. The bank is facing turbulence in its market and Solomon has chosen to reduce his salary as a result. Perhaps bet on bitcoin?
QUANT TRADER IS UK'S HIGHEST TAXPAYER
Alex Gerko, a billionaire quantitative trader, has been named the UK's biggest taxpayer by Bloomberg. The news comes amid a wider debate in the country about the fairness of the tax system and calls for higher taxes on the wealthy. Gerko's firm, AQR Capital Management, manages over $200 billion in assets. Maybe this year, he can quant his way out of paying this much tax, but at the end of the day, trading in TradFi is OPM (other people's money) business, so it's basically going back into the system.
Till We Yield Again