Commodity Insite

The Cat Is Out Of The Bag



A number of headlines this week by several widely followed publications tout the theory that inflation is rearing its ugly head. To those that read my column such “touts” should not come as much of a surprise as I have been forecasting such a scenario for months. From Barron’s, “Inflation Measure Justifies Investor Fears.” From MarketWatch. “The stock market’s new ‘wall of worry’ is built on inflation and rate fears.” From Bloomberg News: “Inflation Is About to Appear ‘With a Vengeance.” Also from Barron’s, “The Ghost of Inflation Reappears.”

The most  popular measure of inflation is the Consumer Price Index. A few days ago upon its release, the data showed, according to Bloomberg News, “U.S. consumer prices rose by more than projected in January as apparel costs jumped the most in nearly three decades. The report sent Treasuries and stocks tumbling, as it added to concerns about an inflation pickup that have roiled financial markets this month.

Understand that stocks, bonds and commodity values dropped approximately 10 percent from late January to a few weeks ago out of fears inflationary pressures were indeed rising and the Fed would quickly hike interest rates in response. Thus, the markets dropped sharply before the CPI report was announced. The report justified the weakness seen with stocks, bonds and commodities going into the report.

Recently, most markets have recouped some (not all) of their losses as the bulls continue to buy breaks rather than sell rallies. It remains to be seen if such a strategy proves profitable as inflationary pressures are rising and the Fed expected to hike rates several more times this year and in 2019. But the market bulls are touting inflation and buying breaks with most all markets..

Even bitcoin experienced a sharp decline over the past few months. Bitcoin topped out on Dec. 18, at approximately $20,500 each but slumped to a low of just under $6,200 each on Feb. 2,  when most all other markets were in the throws of severe losses. But the drop with bitcoin has not discouraged the bulls.

From MarketWatch this week “Go big or go home. That’s the motto of one mysterious investor who put his chips on the table, buying close to $400 million of the No.1 digital currency, bitcoin. The purchase comes as cryptocurrencies are making a comeback after a dreadful start to 2018. Major digital currencies lost as much as 50 percent to start the year as growing regulation and security fears crippled the market, seeing traders bail on their positions. However, the tide has turned.”

No doubt the MarketWatch article from above touts the fact cryptocurrencies, “are making a comeback after a dreadful start to 2018.” That is quite true, but the fact remains the same can be said about, stocks, bonds and commodities that also endured a dreadful start to this year. Yes, bitcoin is in the midst of a nice recovery rally but so are most all other markets. The bulls are back to buying breaks everywhere!

What I found most interesting about the deep pocketed investor/trader that bought nearly $400 million in bitcoin a few days ago are these facts. One, the buyer loaded up on bitcoin between Feb. 9 and Feb. 12, the same time frame when stocks as measured by Dow Jones futures also bottomed. The buyer already had a bitcoin balance of 55,000 coins and his new purchases pushed total holdings to more than 96,000.

Another interesting fact found on MarketWatch was the “unknown” bitcoin trader has an address. His bitcoin address is 3Cbq7aT1Y8kMxWLbitaG7yT6bPbKChq64. He may have thought he was unknown at one time but that is a thing of the past.  His identity is being blabbed all over the internet and in this column as well.

Daily, I watch the Big Four: stocks, bonds, currencies and commodities trip the light fantastic (to dance nimbly or lightly) trying to figure out which way values will move in the future. Over the past few several years, bitcoin and other cryptocurrencies have been a total mystery to me. I do not understand what makes those markets rise. Or fall. I do not understand the psychology of the crypto bulls.

All week I attempted to contact 3Cbq7aT1Y8kMxWLbitaG7yT6bPbKChq64 but with no success. I want to know from him personally what I am missing about bitcoin. I also want to let him know that regarding his identity he is no longer anonymous. Everyone knows who he is. There is no more hiding. His name will soon become a household word. The cat is out of the bag!


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