Alternatives
Christopher Giancarlo is a former chairman of the Commodity Futures Trading Commission, and he spoke out against the Biden Admin’s crackdown on crypto. Biden’s Administration has made it clear that he wants tighter controls on stable coins, which peg to the existing government currencies, and crypto more broadly speaking of the systematic risk. Giancarlo says these regulations are short sited and they fail to see how crypto could improve economic growth and efficiency. He also said that a new regulation bureau should be created to manage crypto and that the government should create its own digital dollar. Giancarlo was a republican appointed by the Obama administration, and this criticism could be very important.
FINSUM: Don’t overlook the ability of stable coins to improve economic effectiveness in allowing for more efficient global financial flows.
Bridgewater is the world’s largest hedge fund and their current CEO stepped down in a recent memo. Former CEO David McCormick is planning on running for a US Senate seat. Stepping into the leadership role will be Nir Bar Dea and Mark Bertolini in a shared leadership role. Bridgewater has had three different CEOs since Ray Dalio stepped down in his capacity as chief executive. Bridgewater gained a cult-like following for its radical transparency in the financial world where individuals rate and score their co-workers. Bar Dea is a relatively young executive in the hedge fund industry, but the pairing is seen as complementary in their shared CEO role. Bridgewater manages over $150 billion in pensions.
FINSUM: Hedge funds made a huge splash in 2021 by avoiding a lot of public turmoil and investing privately, we’ll see if that trend and those returns continue in 2022.
Hedge funds opened the floodgates and entered a firesale on treasuries in response to Powells pivot on inflation. JPMorgan said the selling demonstrates leveraged investors pivoting out of Treasuries. Hedge funds are continually shorting across the futures market, and are now hitting an annual low in U.S. 10-year treasuries futures. The only problem is the tapering hasn’t begun just yet and rate hikes are only in theory. This means hedge funds drastically need the Fed to follow through on a hawkish swing if they don’t want to get hung out to dry.
FINSUM: It would be extremely unlikely the Fed pivots on its tapering. The only way that's possible is if inflation was significantly below target the next one or two quarters.
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Bonds and equities are more correlated than ever and on top of that there isn’t any yield in the bond market these days due to the trillions in QE. Investors are now searching for an uncorrelated hedge to what looks like a looming equity bubble, and private credit markets are giving investors an alternative. High fees, opaque transactions, illiquid markets, and locked up finances are downsizing private credit but more companies are searching for financing partnerships in private markets. Middleman companies like Blackstone and Carlyle Tactical Private Credit can match companies in transactions that wouldn’t be possible in public markets and generate yield that wouldn’t normally be possible. In order to meet the rising demand private creditors are pitching to larger companies that could have access to the public bond market and giving persuasive pitches.
FINSUM: Private credit is the most enticing alternative to the volatile bond market.
Traditional crypto dominates headlines, and while regulations are an inevitability in the U.S.; stable coins are getting some attention from regulators as well. Stable coins are cryptos pegged predominantly the U.S. dollar, using assets like T-bills to back them as an underlying asset. They are used to trade other crypto currencies by many investors and have yields bringing in over 7%. However, the underlying assets backing stable coins are opaque and include commercial paper, loans, or swaps. The Biden admin is calling on Congress, and the Treasury if they fail to act, to regulate the industry because the fear of a run on stable coins is gowing. However, Wall Street views these regulations as a positive for the industry and legitimize stable coins. Mastercard, Visa, Western Union, Silvergate Capital and Signature bank could all benefit given how much they interact with stable coins.
FINSUM: Regulation is the best thing for stable coins, they get so many overseas investors who want hold dollar denominated assets, and this will calm fears of a run on the asset.
Fine wine’s track record of low volatility and low correlation to equity markets make it...See More