MicroStrategy Soars: Stock Up 1000% in 4 Years! 📈

Good Morning!

With Japan out for Mountain Day, Asian markets are showing some spunk. The Nikkei's taking a breather, but futures hint at a 400-point climb if it were open. Meanwhile, the dollar's chilling around 147 yen. Keep an eye on the Middle East though – tensions are rising, and the Pentagon's not taking chances.

In today’s email:

• Fed Watch: All eyes on PPI and CPI numbers this week

• Bitcoin: Bitcoin back down to $58k

• Rate Cuts: RBNZ maybe cutting rates soon

• MSTR: Up 1000% in 4 years thanks to Bitcoin!

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THE BIG IDEA

Yen weakens amid thin trading as markets brace for crucial US inflation data, with Fed rate cut expectations in focus

The yen extended its gradual decline against the dollar on Monday, with trading thinned by a Japanese holiday. This follows a tumultuous week that began with a massive selloff across currencies and stock markets, driven by worries over the U.S. economy and the Bank of Japan's hawkishness. The dollar was trading at 147.15 yen, up 0.4%, while the euro stood at $1.0920 and the dollar index remained flat at 103.18.

Investors remain unconvinced the Fed can afford to go slow with rate cuts, pricing in 100 basis points of easing by year-end - a scenario typically associated with recession. This leaves markets highly vulnerable to upcoming data and events, particularly the U.S. producer and consumer prices numbers due Tuesday and Wednesday, the global central bankers' meeting at Jackson Hole next week, and even earnings from AI giant Nvidia later this month.

The recent unwinding of the popular yen carry trade has significantly impacted markets, causing a 20 yen drop in the dollar-yen pair between July 3 and August 5. Leveraged funds' position on the Japanese yen shrank to the smallest net short stance since February 2023 in the latest week.

J.P. Morgan analysts estimate that 65-75% of carry trade positioning has been unwound

They revised their forecast for the yen to 144 per dollar by the second quarter of next year, suggesting consolidation in the coming months. They

Implied volatility on the yen, measured in yen options, has subsided from recent highs. Overnight volatility had spiked to 31% on August 6 but is now down to around 5%.

As markets brace for potentially market-moving data, the week ahead promises to be pivotal for currency traders and investors alike. With the delicate balance between inflation concerns and recession fears, upcoming economic indicators will be crucial in shaping the Fed's policy decisions and, consequently, currency movements in the coming months.

MARKETS AT A GLANCE

TOP NEWS

China's bond market faces turbulence as the central bank intervenes to curb falling yields

China's bond bulls are locking horns with the central bank as it tries to stem plummeting yields. Despite the PBOC's heavy-handed tactics, including state bank bond sales and cash withdrawal, many investors remain bullish. They're betting on a weak economy and deflation to keep the rally alive. But with rising volatility, the market's in for a wild ride.

RBNZ may cut rates earlier than expected as economic indicators weaken

New Zealand's central bank might surprise markets with a rate cut this week, a year ahead of its own guidance. With inflation cooling, unemployment rising, and growth sluggish, 12 of 31 analysts expect a 25 basis point cut. Markets price a 76% chance of easing. Even if rates hold, forecasts are likely to be revised downward, signaling potential cuts later this year.

Bonds regain appeal as portfolio hedge due to higher yields and changing economic conditions

Bonds are making a comeback as reliable portfolio hedges after years of disappointment. With central banks raising rates to combat inflation, bond yields had surged to decade-highs, restoring their attractiveness. The negative correlation between stocks and bonds is returning, enhancing their diversification value. However, persistent inflation and economic uncertainties remain challenges for bond investors. Despite risks, bonds are reclaiming their status as crucial portfolio components.

CRYPTO

MicroStrategy's Bitcoin bet outperforms Warren Buffett's warnings, with 1,000% stock gain in 4 years

MicroStrategy's bold Bitcoin strategy has paid off big time. Since its first BTC purchase in 2020, the company's stock has surged 1,000%, outpacing Bitcoin itself and crushing the S&P 500's returns. With $5.39 billion in unrealized profits, MicroStrategy's gamble has left Warren Buffett's Berkshire Hathaway in the dust, despite the Oracle of Omaha's crypto skepticism. Talk about a digital gold rush!

Bitcoin nears $58K as crypto market faces weekend selloff ahead of key economic data

Bitcoin slid 4.8% to just above $58,500, leading a broader crypto market decline. ETFs tracking BTC and ETH saw outflows, while altcoins like SOL and TON fell 7%. Analysts warn of potential further drops but note upcoming economic releases could provide upward pressure. The market remains susceptible to traditional finance movements, with key data and earnings reports due this week.

Tether dismisses Celsius' $2.4B lawsuit as "baseless," claiming BTC liquidation was consensual

Tether's firing back at Celsius over a hefty $2.4 billion lawsuit. The stablecoin giant calls the suit a "meritless shakedown," asserting that the 2022 BTC liquidation was done with Celsius' full consent. Tether argues Celsius is trying to shift blame for its own financial mismanagement. With Tether vowing to "vigorously defend" itself, this crypto courtroom drama's just heating up.

Crypto liquid funds are bullish on Solana and DeFi despite recent market turbulence

Despite recent market volatility, major crypto funds remain optimistic, particularly about Solana and DeFi. Investors like Joe McCann and Ryan Watkins are betting big on SOL, citing its undervaluation compared to Ethereum. DeFi is also attracting attention, with firms like Maven 11 and DeFiance Capital eyeing its growth potential. While some are reducing Bitcoin exposure, the overall sentiment leans towards alt-coins and innovative blockchain projects.

GOLD

Gold rally may continue despite recent sell-off, driven by geopolitical tensions and rate cut expectations

Gold's recent dip amid market turmoil hasn't dimmed its overall shine this year. Up 15% in 2024, it remains a top-performing commodity. Central bank buying, particularly from emerging markets, continues to boost demand. While China's purchases have slowed, global ETF inflows are picking up. Looking ahead, geopolitical uncertainties and anticipated Fed rate cuts could push gold to new heights, with prices expected to peak at $2,450/oz in Q4.

DAILY ECONOMIC CALENDAR (ET)

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