- Capital Contrarian
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- Hotdogs and HODLing Bitcoin
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Estimated read time: 4 minutes 30 seconds
What's happening with Bitcoin?
What's happening in private markets?
CHINA (Where my money is)
BITCOIN VS USD
"Bitcoin is a hedge against inflation" - the Bitcoin maxy's YELLED
Well... inflation has soared and Bitcoin has tanked
So what happened with Bitcoin?
Markets are too complex for a simple WHY
CNBC - “Markets down on inflation worries” - It's never that simple
However, here are my thoughts on Bitcoin:
Bitcoin historically underperforms during slowing growth
What is slowing growth? When US GDP growth slows QoQ (quarter over quarter)
What usually signals slowing growth first?
The bond market, more specifically, high yield spreads
What are high yield spreads? The difference (or spread) between a high yield (junk bond) and a treasury (US 10 year) or investment grade bond
In 6th grade terms: How much more interest do I have to pay you to hold this shit debt that I may not pay you back (high yield debt) on versus this debt I will pay you back on (treasury)?
For example: If you loaned me $10,000 and you were 30% sure I would pay you back, how much interest would you make me pay you? Probably a lot
But if you loaned me $10,000 and you were 98% sure I would pay you back, you'd probably charge me less interest right? That's spreads
See what happened to high yield spreads during COVID in March of 2020 (black line below)? Now look at May and June of 2022 starting to pick up... 👇
Hedgeye Risk Management
Pro-tip: The best hedge fund managers in the world pay attention to high yield spreads
Soooo what is performing well? George Washington baby.. THE US DOLLAR
Why? When there is market turmoil, people move into the strongest currency backed by the most powerful nation... the US Dollar
Bitcoin vs. USD
During times of turmoil, people fall back to the good ole US Dollar
Why? The dollar is backed by the US gov’t
During recessions, the dollar historically outperforms
Bitcoin is supposed to be a "currency", a substitute for the US Dollar
Hence, if people are buying the dollar, it makes sense other “currencies”, like Bitcoin, would underperform
Tweet of the Week
BlockFi selling at a 99% discount to their Series E valuation doesn't sound exactly bullish!
Startup Valuation Turmoil
As we discussed last week, more and more startups are laying off workers
The times of crazy and unjustified valuations seems to be on life support or just about over
Some of venture capital's favorite children are starting to face economic reality 👇
But... it's not just startups
Even the FAANG companies are starting to feel the heat of slowing profits
Meta apparently has a different approach than just laying people off...
New York Post
Startups need to focus on their cash burn and their cash runway ASAP
The time to right size your company is.... now
CHY-NA (Where my money is)
Want to know an economy that's NOT headed towards a recession?
Look no further than China
China is seeing GDP accelerating QoQ and we see that continuing into the future
We are buyers of the following tickers on down days:
$KWEB, $KBA, $DIDIY, $PDD
Also in our portfolio:
$UUP - Bullish US Dollar
$GLD - Gold baby
That's where my money is and when the S&P is down 3% and you're up 1%, you'll be feeling damn good about China
I think one former president nailed the US stock market vs China over the next few months
Hopefully your hangover from beer and hotdogs is settling and you are ready for this week of markets
Chat again next week!
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.