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The Macro Situation

It’s almost as if the recent bank failures were a good thing for the markets. It showed the US government’s resolve to keep things afloat while at the same time dampening the heat of the Fed’s interest rate increases. Three factors that might spoil the mood: 

• other banks might fail;
• emerging lending restrictions as the Fed mulls over how SVB’s risk portfolio got away from them; and
• an “either/or” – “has the market priced in too many future rate cuts or too few?”

In the immediate term, the larger economic environment is good, or at least calm. Jobless claims rose last week, boosting markets. So there’s a bit of breather, with certain sectors perhaps being able to get out ahead with an end of Q1 rally.

The longer term view: It looks like the Fed is expecting consecutive quarters of negative growth following Q1 2023, which means a mix of one interest rate increase (25bps), followed by cuts (perhaps 50bps). You can find more of the details on AOTB’s recent Quora post of CME figures.

Stock Watch

Stock Tickers to follow:

Macro-Dependent:

• Long-term US Bonds (TLT, IEF)
• Gold (GLD), Silver (SLV)
• Oil: XOM, VLO, SLB

Real Estate:

• Gaming and Leisure Properties (GLPI)
• Iron Mountain Incorporated (IRM)
• Prologis (PLD)
• Public Storage (PSA)

AI:

• Microsoft (MSFT)
• Micron Technology (MU)

It’s been a relatively stable week for markets, which opened up more risk-on gambits. Liquidity looks to have therefore moved away at midweek from precious metals, causing a slight dip. But GLD and SLV will be gainers in the long run, given expectations of a recession (see Macro above).

Despite volatility in crude oil prices, XOM remains consistently stable. This may have to do with its forward-looking strategy to take on climate change measures. In general, the major oil stocks will face a complex future with questions about the expected recession, an uptick in travel in summer months, and China’s continued re-opening.

Real estate may be rebounding. A Reuters consensus had expected a 2.3% decline, but the National Association of Realtors stated its pending home sales index came in at plus 0.8%. Pick your REIT to follow!

What’s peaking in the AI space this week? Microsoft is OpenAI’s “biggest investor” . Micron Technologies looks to benefit from the AI wave with an increased demand in chip technology; its stock has risen as much as 5%. One potential hiccup, the Chinese government is conducting a review of the company in what looks to be a battle of semiconductors and cybersecurity.

Crypto Watch

Crypto Tickers to follow:

• “The Goliath Narrative”: ARB
• “Bank Safety” Narrative: BTC, ETH
• “AI” Narrative: MATIC, GPT, FIL, RLC
• The “True Utility” Narrative: RNDR

Despite minor complications with its airdrop initiative, Arbitrum is the dominant figure in the DeFi and investment foreground. As long as the crypto space remains relatively stable, liquidity provision and borrowing should be vibrant. According to CoinDesk, “Trader Joe’s recent success on Arbitrum has nearly eclipsed its trading volume on Avalanche, the DEX’s original home.” That’s huge.

What can you say about BTC? It seems to be benefitting from the Q1 rally and its role as a perceived hedge. To boot, it’s developing its L2 utility. ETH and other Alt coins should follow.

As the AI space expands and develops, we’ll highlight news about emerging projects. Polygon (MATIC) has released its ZK roll-up technology, called Polygon zkEVM.

Render Network (RNDR) has turned some heads lately with noticeable gains in token value and a socially beneficial project, to boot. Render provides GPU compute power to artists over a distributed network so they can render 3-D art. Compared to its all-time high in Nov 2021 ($8.78), RNDR may be undervalued by 85%.

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This newsletter was created by The Art of the Bubble/1.2 Labs and is provided for educational and entertainment purposes only. You should expect no financial returns one way or another based on the statements contained herein.Robin Technologies and Analytics LLC is the firm that distributes The Art of The Bubble products. The firm does not provide individually tailored investment advice and does not take a subscriber’s or anyone’s personal circumstances into consideration when discussing investments; nor is Robin Technologies and Analytics LLC registered as an investment adviser or broker-dealer in any jurisdiction.