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Monthly letter book
March 12: As crude oil prices have normalized to pre-pandemic levels in recent months, U.S. oil production has also begun to recover from the impact of the pandemic.
US crude production reached about 10.9 million barrels per day in the week ending March 5, 2021, up from a recent low of 9.7 million barrels per day at the end of August. 2020. US crude production averaged about 13 million barrels per day before the pandemic.
From a minimum of 172 platforms in operation at the end of August 2020, the
the rig count has risen 80% to 310 rigs as of March 5, 2021. As these rigs increase production, they could help further reduce US dependence on imported oil.
The United States imported about 5.7 million barrels of crude oil each day during the week of March 5, down from an average of 6.5 million barrels per day in February 2020 before the pandemic.
—John Stoltzfus, Jim Johnson
March 11th: Small tech companies have elbowed their way into certain areas of banking and financial services with little capital but plenty of technology expertise. They have often entered the market in low-margin areas, such as payments or retail, relying on traditional banks to accept secured deposits or provide the capital for loans. Now, Walmart appears to be forming its own fintech company, while the fintech companies Social Finance and Square have grown and received bank letters that will allow them to avoid depending on external banks or capital markets. If the big established banks weren’t paying attention before, they certainly should now.
Instead of buying a large bank as a gateway to banking, Walmart can bet on technology to help you get in. Walmart hired Omer Ismail from Goldman Sachs Group, where he ran Marcus, the firm’s online consumer banking business.
In his new role, Ismail will lead a fintech partnership between Walmart and a venture company.
Walmart, which tried but failed to obtain an industrial loan letter in the mid-2000s, already offers prepaid credit and debit cards, check cashing, money transfers and installment loans through third parties. It also has 200 million customers a week who visit the company’s 10,500 stores and clubs in 24 countries and its e-commerce websites.
Goldman, which received state banking charter during the financial crisis, has used technology to help it get into consumer banking. Marcus is an online-only bank that offers high-yield savings accounts, certificates of deposit, and personal loans. It also recently announced plans to launch Marcus Invest, a low-cost digital investment platform. The company gained wide recognition when Apple chose Marcus as the bank behind Apple’s credit card. Marcus does not offer checking accounts, ATMs, branches, or mobile check deposits. But it generated $ 1.2 billion in revenue last year and kept $ 97 billion in deposits.
A technical analysis of Bitcoin
The institutional vision
March 10th: Bitcoin suffered a bearish key reversal after hitting our $ 55,000- $ 60,000 target. The bearish reversal was only the second since Bitcoin began trading. The occurrence after a long and large percentage gain warns us that a top may form.
How well prices absorb strong selling pressure will be critical in determining future price action. $ 58,000- $ 60,000 offers strong resistance. On the downside, $ 40,000 is critical support. A break of the closing support at $ 40,000 would force us to re-evaluate our position …
Despite a critical period ahead from a price perspective, the relative strength is still powerful! The monthly relative strength chart against the S&P 500 Equal Weight Index shows a dramatic breakout from a midway consolidation. Emerging as recently as October, relative strength still has much more to go up in price and time.
Mr. Powell, listen
March 10th: Why is the Federal Open Market Committee of the Federal Reserve continuing its emergency pace (that is, out of a total of $ 120 billion per month) of purchases of quantitative easing assets of Treasury and mortgage-backed securities of agencies, as the economy is trending near full recovery to its full employment level before the pandemic by the end of 2021?
On our models, before March 16-17 [FOMC] meeting, we would deliver Mr. Powell [Fed Chair Jerome Powell} the following monetary policy recommendations:
a. The FOMC likely is NOT the only ‘game in town’ over years 2021 and 2022 and 2023,
b. The economy is far more resilient and flexible than the committee’s assessment(s) for it over the prior twelve-months,
c. The FOMC should reduce the pace of asset purchases at the June 15-16, 2021, meeting to $60 billion per month in Treasury securities (from the current $80 billion per month) and to $20 billion per month (from the current $40 billion per month) in agency mortgage-backed securities,
d. The FOMC should maintain that cumulative pace of $80 billion per month in asset purchases until 1Q-2022, when it will, again, review the “progress” towards its mandate,
e. Outline at that time (at the March 2022 meeting) another reduction to the pace of asset purchases and, then, by the September 2022 meeting likely cease the QE asset purchase program,
f. After the September 2022 meeting, simply embark upon a program to “re-invest” maturing proceeds of the Federal Reserve’s balance sheet.
—John D. Herrmann
Emerging Markets Bet on Tech
March 4: The drivers of value creation over the past decade have shifted, transforming the shape of emerging-market equities as an asset class. The MSCI EM Index has gone from being highly dependent on energy and commodities to being driven by IT [information technology], media and consumer companies.
The four largest components of the index in 2020—
Alibaba Group Holding,
TSMC and Samsung Group: represent almost a quarter of the weight of the index. We found that current valuations in emerging markets do not fully reflect the index’s shift to higher growth sectors.
The transformation of India
it is a microcosm of change in emerging markets in general. Reliance was originally an oil and gas infrastructure and energy company, but in the last decade the company has invested heavily in telecommunications and other less commodity-driven areas. As part of that shift, Reliance has built a fiber optic and wireless network in India and then moved to capitalize on the e-commerce, fintech and social media opportunities of the broad consumer base it built through that launch.
The weights of countries in the index have also shifted significantly, shifting towards Asia at the expense of Latin America and the Europe, Middle East and Africa (EMEA) region.
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