Bitcoin Price All-Time High Could Be Explained by the 'Carry Trade'
As stocks benefit from a weakening global currency, the crypto asset has surged to its highest ever price.
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Typically, a morning with global bond yields higher, driven by vigilantes, not exceptional growth, isn’t great for stocks.
But the yen weakening (often associated with the “carry trade”) seems to be helping.
Bitcoin has risen from $110,000 before the U.S. government shutdown to over $124,000 on Monday. Is bitcoin celebrating the government shutdown? Or is this just part of the “carry trade” and risk-on mentality? I’m assuming the latter, as I struggle to see why U.S. stocks should like the shutdown and ongoing political uncertainty.
One thing I remain very excited about, both domestically and globally, is the conversion of two major themes:
1. Production for Security
This is the need for countries to produce “base levels” of “things” necessary for national security. “Things” runs the gamut from chips, to big pharma, to processed/refined rare earths and critical minerals, all the way to electricity production (the importance of which is rising rapidly as competition to dominate/grow AI and data centers is fierce).
2. Electricity Production
Most countries, realistically, are not utilizing natural gas (and other fossil fuels) enough. Yes, there are potential climate issues, but the truth is, it is difficult to see a path forward to more sustainable energy without increased fossil fuel utilization for the next decade or two.
Nuclear will be an option for many countries. Again, some people don’t like it, but it is difficult, at the moment, to see a future of massive energy demand where nuclear doesn’t represent a significant portion of the base load supply.
Sustainable, even in the U.S. will be utilized. Over time (and I think this is decades, not years) sustainable will be a key component. Sustainable hasn’t rallied as much in the U.S. as some other segments, but I think it too will catch on. As much as the administration doesn’t want to support this area (it seems to have an especially strong dislike of wind), the reality is sustainable (particularly solar) can be ramped up more quickly than other forms of energy production.
And anything linked to battery storage of energy is once again on the rise (many, including myself, think the government involvement in (LAC) makes the most sense if they understand the need to do more with batteries).
Does the Shutdown Matter?
Normally, I would say no, but I think there is a “collision” course possibly being set up, as my sense is that the administration is happy to use the shutdown to take some actions on the employment front that the Democrats don’t think they are willing (or able) to do.
Positioning and Market Outlook
I remain comfortable owning bonds of all type (with muni closed-end funds my favorite way).
I want my portfolio “littered” with stocks that benefit from production for security, heavily skewed toward electricity production.
On the side of areas that have done well, that I’m increasingly uncomfortable with, but still need to own, I prefer foreign-focused ETFs, especially emerging markets and China, versus the Magnificent Seven, but that is looking wrong to start the week.
