Tuesday Morning Reads
- Much Worse Than Those From Covid
- China’s Coal Rally Slows
- Built a $30 Billion Fortune
- Rush In to Catch China Cross-Border Wealth
- Bitcoin Pushes Toward Record
- Treasury Warns
- The S.E.C. Weighs In on Meme-Stock Mania
- Company Officials Converge on Stores
- Push to Lure Workers Back Into Offices
- What’s Your Pleasure? How About a T-shirt?
- Nuclear Fusion Edges Toward the Mainstream
The crypto industry is celebrating a long-awaited milestone today as the first exchange-traded fund linked to Bitcoin (BTC-USD) launches on the New York Stock Exchange. The ProShares Bitcoin Strategy ETF (BITO) does not invest directly in Bitcoin, but will rather hold futures contracts of the digital currency - meaning it will have a very high correlation with Bitcoin, but won't mirror the token's exact value. It will also cost more to own the fund, but some may be willing to pay up for institutional level custody, execution and security.
Bigger picture: The new approval could bring more investors into the crypto market as it comes with a more regulated structure. That means 401(k)s and IRAs could now have an allocation of the sector, while the ETFs will also be available through brokerage accounts. Until now, Bitcoin has been a favorite among tech-savvy or younger traders, who are more comfortable with its technology, as well as the risks or price swings involved with their investments. At the time of writing, Bitcoin is up 1.7% to $62,324.
While the SEC has recently taken a tougher stance on crypto, the ETF green light highlights what structure the agency is currently able to tolerate. Bitcoin futures trade on the Chicago Mercantile Exchange and are regulated by the Commodity Futures Trading Commission, while Bitcoin-related ETFs have already launched in other countries like Canada. There are also concerns about purchasing Bitcoin through digital currency exchanges, given worries about hackers or losing so-called private keys.
Go deeper: The ProShares Bitcoin Strategy ETF might be the first to list in the U.S., but it sure won't be the last. Grayscale Investments is jumping on the train with plans to convert the Grayscale Bitcoin Trust (OTC:GBTC) - which has $38.7B assets under management - into a spot ETF. Other issuers that are excited about the recent approval include names like Valkyrie, Galaxy Digital, VanEck, ETF Series Solutions and ARK Invest. (13 comments)
Stock index futures are inching up, with contracts linked to the Dow, S&P 500 and Nasdaq ahead by 0.3%, before Week 2 of earnings season kicks into high gear. Investors will be particularly parsing reports this week, as results from the banks and financials only provided metrics on spending and lending in the economy. As other factors continue to bite businesses and consumers alike, it will be crucial to see how supply chain disruptions, inflation, higher energy costs and labor shortages affected the biggest U.S. corporations in Q3.
"Whether we end up getting this finishing move at the index level this year or not will depend largely on retail participation, the message that Q3 earnings bring from a guidance standpoint, and the path of PMIs into year end," said Mike Wilson, chief U.S. equity strategist at Morgan Stanley.
On the economic calendar: Clues on the state of the property market are due out at 8:30 a.m. ET. U.S. housing starts is expected to come in at a 1.621M annual pace in September, versus the 1.615M seen in August, which was much higher than expected. Builders have been caught between strong demand from buyers and shortages of labor and materials, and that could have a powerful multiplier effect throughout the economy.
Hypersonic missiles are on the radar following a report from the Financial Times stating that the country conducted a nuclear-capable glide vehicle test in August that "circled the globe in low-Earth orbit." The missile missed its target by "about two-dozen miles," but the "advanced space capability caught U.S. intelligence by surprise," according to the five unnamed sources. China has denied the latest headlines, claiming instead that it was carrying out a spacecraft check focused on reusable technology.
Quote: "We watch closely China's development of armament, advanced capabilities and systems that will only increase tensions in the region," Defense Secretary Lloyd Austin said on Monday, without commenting on the report.
According to the FT, this test showed two alarming advances by China. The first is a Fractional Orbital Bombardment System, which means the country could, in theory, send missiles over the South Pole (most U.S. defense systems are concentrated along the northern polar route). The second is the hypersonic glide vehicle itself, which flies at Mach 5 and is maneuverable in flight - compared to the fixed parabolic trajectory of ballistic missiles - making it harder to track.
Policy steps: Advances in hypersonics by Beijing could strengthen concerns among those in Washington who think the U.S. needs to do more to stay ahead of China. The Biden administration is also in the middle of a Nuclear Posture Review, which is mandated by Congress to decide U.S. nuclear policy (how many weapons the country needs to stockpile, modernize, deploy, etc.) Some stocks that could benefit from additional hypersonic spending include Lockheed Martin (NYSE:LMT), Raytheon (NYSE:RTX), Northrop Grumman (NYSE:NOC), Boeing (NYSE:BA), Kratos (NASDAQ:KTOS), L3Harris (NYSE:LHX) and Aerojet Rocketdyne (NYSE:AJRD). (6 comments)
Fed Chair Jerome Powell sold up to $5M in a broad index fund as the economy was recovering from the pandemic last year. In a disclosure to the U.S Office of Government Ethics, Powell notes a sale from the Vanguard Total Stock Market Index (NYSEARCA:VTI) of between $1M and $5M in October 2020. He also sold between $50K and $100K of the index on Sept. 21.
Snapshot: The sale was first reported by The American Prospect, whose headline said Powell unloaded while the market was "tanking." Putting it in perspective, the Fed chief traded before a 1.5% pullback after the V-shaped recovery in shares from the pandemic nadir. The S&P then resumed its march higher, setting all-time highs. VTI is up more than 35% since he sold.
In December, Powell sold smaller stakes, up to $250K, of the Causeway International Value Fund (CIVIX), the Goldman Sachs U.S. Equity Dividend and Premium Fund (GSPKX), the iShares MSCI EAFE ETF (EFA) and the iShares Russell 2000 ETF (IWM). It was previously reported that Powell owned securities that the Fed was buying in 2020.
Outlook: Powell's holdings and those of other Fed officials came under scrutiny earlier this year, with Dallas Fed Robert Kaplan and Boston Fed Eric Rosengren leaving their positions after trades within Fed rules that were nevertheless controversial. Those developments also led to Powell opening an ethics review on financial holdings. Separately, Senator Elizabeth Warren, who opposes Powell's renomination as Fed chairman, has called for SEC investigations into Kaplan, Rosengren and Fed Vice Chairman Richard Clarida for insider trading. (96 comments)
In Asia, Japan +0.7%. Hong Kong +1.5%. China +0.7%. India -0.1%.
In Europe, at midday, London +0.1%. Paris flat. Frankfurt +0.1%.
Futures at 6:20, Dow +0.3%. S&P +0.3%. Nasdaq +0.3%. Crude +1.1% at $82.61. Gold +0.8% at $1779.90. Bitcoin +1.7% at $62324.
Ten-year Treasury Yield +1 bps to 1.6%
Today's Economic Calendar
8:00 Fed's Daly Speech
8:30 Housing Starts and Permits
8:50 Fed's Harker: "C3: Cybersecurity Collaboration & Cooperation"
8:55 Redbook Chain Store Sales
1:00 PM Fed's Bostic: “Exploring Careers in Economics”
2:50 PM Fed's Bostic: “Back to Work: Helping the Long-Term Unemployed”
What else is happening...
FDA may authorize COVID vaccine 'mix and match' this week - NYT.
Videogame sales rise for fifth straight month, paced by consoles.
World's largest uranium producer to start physical uranium fund.