Well folks, the cost of capital is officially up 50 bps as the Federal Reserve has brought American interest rates to a range of 425 to 450 bps…despite having being thought to be well priced in, news of this announcement yesterday simultaneously sent markets tumbling and risk-free USTs higher. Read on for more on that, our daily trade recommendation and stories on the whirlwinds facing the tech sector in this 175th Coachman’s Report.
Markets in Review
NA equities are posturing for a risk-off session today with premarket futures on the Dow, S&P and Nasdaq trading down over 1% across the board at the time of writing. With the market still adjusting to this new rate environment, asset owners everywhere are most importantly pricing in future rate increases to the Fed's new semi-dovish tone. In fact, this actually sees rates capping off at 475-500 bps halfway through 2023 before reversing again. While we do think that a 5% rate environment is likely, it's highly unlikely that the Fed reverses tone and undoes all the hard work and suffering we’ve been through to drop a couple of bps. As such, if inflation isn’t below 3% at that time, a market neutral 5% rate will likely be with us for the foreseeable future. Additionally, investor sentiment has dropped even lower with a 45% share of market participants now in the bearish camp. However, the S&P is posturing for a breakout as support is stronger than ever and price action has tangoed with 50-day MA for the past week now.
Short: CleanSpark Inc. (CLSK-NYSE) | Timeline: 2 days
CleanSpark, Inc. (CLSK), which provides bitcoin mining and energy technology solutions worldwide, reported earnings yesterday after the market closed. The company missed earnings and revenue estimates by 276.48% and 3.38%, respectively, while Adjusted EBITDA came in at $2.9 million, decreasing 81% from $15.2 million in the preceding quarter, amid macroeconomic headwinds in the economy and bitcoin mining industry. (Full Story) Referring to the chart, CLSK has suffered immensely over the last 6 months, falling from highs of around $6. From the stock’s most recent apex, it has oscillated through a steep downward channel and as it reaches upper resistance, traders should expect a spike in short interest - especially with Stochastic RSI in extremely overbought territory.
Times Still Tiking Since our last piece on the world’s most influential social media app more bad news has been floated it's way. The US Senate has unanimously approved a bill that will ban TikTok on all government devices, legislation that will now head to the House with seemingly little opposition. Moreover, a bill that would prohibit social media apps from any unfriendly nation, namely Russia, NK, Iran, Cuba, Venezuela and China, has also recently been proposed in the house with bipartisan support. It may be worthwhile for investors to consider the engagement vacuum that a full removal of TikTok in the US would present to existing social media companies. Even in a time where American politics and society are the most divided since the Civil War, unanimous bipartisan support signals that TikTok is a common enemy, no matter which side of the aisle you sit on. AAA Antitrust After months of deliberation, the FTC has sued to block the $69B sale of Activision Blizzard to Microsoft. The agency claims that due to Microsoft’s already large portfolio of gaming studios and generally large size in the market, the acquisition of AB would allow Microsoft to suppress competitors. Microsoft’s President offered to sign an agreement with the FTC that would give rival consoles access to Call of Duty games for the next decade, however, the offer was rejected. The FTC is in part basing their decision off of Microsoft’s prior actions when acquiring studios and titles as they’ve made a wide variety of creative content Xbox exclusive.
Musk's Twitter tweaks foreshadow EU showdown over new rules
Self-proclaimed free speech warrior Elon Musk’s more unfettered version of Twitter could collide with new rules in Europe, where officials warn that the social media company will have to comply with some of the world’s toughest laws targeting toxic content. (Full Story)
China’s Economy Braces for More Turmoil as Covid Wave Spreads
China’s economic activity weakened in November before the government abruptly dropped its Covid Zero policy, with a surge in infections in coming months likely to cause more turmoil and push policymakers to increase stimulus. (Full Story)
Investors bet Fed will blink if recession hits despite 'higher for longer' mantra
Some investors believe an expected recession will force the Federal Reserve to loosen monetary policy next year, even as the central bank projects it will raise rates higher than it previously anticipated and keep them there longer as it fights to crush inflation. (Full Story)
FTX Executive Tipped Off Bahamian Regulators
Several days before FTX collapsed into bankruptcy, one of Sam Bankman-Fried’s most senior executives was tipping off Bahamian authorities to possible misuse of funds at the exchange. (Full Story)
Chart of the Day: US C&I Loans…
“Yesterday I dared to struggle, today I dare to win.”
– Bernadette Devlin
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