Mar. 15 Markets Report: Markets Are Red. What Now, Fed?

The war in Ukraine is still being waged on many fronts, with conflicts intensifying around the capital city of Kyiv. On March 13, Russian forces bombed the Yavoriv International Center for Peacekeeping and Security—a military base near the Polish border. This strike prompted fears that the war could start to spill over into other countries. 

Citizens who haven’t been able to escape are increasingly being caught in the crossfire. Even an American journalist, Brent Renaud, was shot dead while covering the invasion. May his brave soul rest in peace. 

Sanctions against Russia continue to mount, with the U.S. banning over $1 billion of Russian imports, including energy products, seafood, alcohol and high-end goods. The U.S., the EU, and the G7 are also taking steps to revoke Russia’s “most favored nation” trading status. 

Back in the States, the Consumer Price Index (CPI) for February came in at 7.9% — 0.8% higher than in January. This is the highest rate we’ve seen in 41 years, with the CPI hitting 8.9% in 1981. Food and energy prices were the biggest contributors to inflation, with food costs rising 7.9% and energy costs up a whopping 25.6% year-over-year. Experts worry that the CPI is bound to climb higher still, since the Ukrainian invasion only began at the end of February.

The world’s richest person, Elon Musk even chimed in on the topic of inflation, imploring his followers to hold real estate and stocks instead of cash. He also mentioned that he is holding onto his BTC, ETH and DOGE. 

To combat inflation, The Fed has stated its intention to raise interest rates by 0.25% this Wednesday. This, combined with the ongoing war in Ukraine, will surely keep volatility high across financial markets in the coming weeks. Check out the details and get updates on more of your favorite asset classes below.

Crypto’s price action has been pretty boring for most of the week. Bitcoin briefly rallied to $42,000 last Wednesday, but immediately bounced back to the $38,000 and $39,000 range we’ve been stuck in since. 

On Monday, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) voted on a legislative package called the Markets in Crypto-Assets Directive (MiCA). This bill concerned the environmental sustainability of crypto mining and whether it should be banned. Since the EU accounts for up to 14% of Bitcoin energy consumption, a ban would have a huge negative impact on proof-of-work (PoW) blockchains like Bitcoin and Ethereum. 

Fortunately, the ECON voted against this PoW ban. After crypto investors collectively breathed a sigh of relief, all laser eyes turned to the Fed’s interest rate decision this week.

Sign O’ the Times:

• Shark Tank investor Kevin O’Leary told CNBC that 20% of his investment portfolio is in crypto. 
• A bill that allows banks to offer custodial services for Bitcoin just passed in the Virginia Senate. 
• $7 billion payment processor Stripe just launched a service for crypto and NFT payments. 

If the cost of housing keeps going up like this, pretty soon we’ll all be living in cardboard boxes. Only half joking.

Digging into the CPI data, you can see that the cost of rent has climbed 0.6% in February. So that’s the first blow. Real estate brokerage Redfin also reported that a record 8.2% (6 million) of U.S. homes are now valued at $1 million or more, almost double what it was before the pandemic. The largest concentration of million-dollar homes belong to the Bay Area, San Francisco and San Jose, with prices in Anaheim, California growing at the fastest rate. 

One of the leading causes of sky high home prices is low inventory. Many experts believed that we’d see a decline in home prices after the pandemic, as more people start to sell their homes and move around again. But that hasn’t quite happened yet. Real estate marketplace Zillow recently reported 729,000 home listings in February, down over 230,000 from last year. 

The price appreciation we’re seeing in real estate also extends to farmland. The February report from Seventh Federal Reserve District (covering Iowa, Illinois, Michigan, Indiana, and Wisconsin) says that Corn Belt agricultural land values have risen by 22% from January 2021 to January 2022, the largest gain we’ve seen since 2013. 

Farmland owners in Iowa have done the best at 30%. Even adjusted for inflation, farmland was up over 17%, demonstrating its utility as a hedge against inflation. No wonder Bill Gates is the largest farmland owner in the United States. If you’re itching to make dollar bills like Bill, you can add some farmland exposure to your portfolio with these Agriculture REITs and ETFs

Just about every stock kickstarted their week in the red. The war certainly played a role, but another likely culprit is the Covid-19 spike in Shenzhen, China that has already resulted in lockdowns. There are talks of a new variant called “deltacron”, which has also been detected in Europe. 

Both the Dow Jones and S&P 500 are down about 1%-2% from their highs this past week, while the NASDAQ took a 5% haircut since last Wednesday. Financials (+1.25%) and Health Care (+0.68%) were the top performing sectors, with stocks like American Express, Visa, Moderna and Pfizer leading the rally. Conversely, the Energy sector was the week’s biggest loser at -2.89%. 

In the midst of all this macro uncertainty, investors are fleeing to safer (but lower ROI) assets like bonds. The U.S. 10 Year Treasury Note climbed to over 2.16%, the highest it's been since 2019.

But beware, bonds might not continue their upward ascent. If the Fed announces an interest rate hike this Wednesday, then bond prices are expected to sink like the Endurance ship they just found in the Antarctic. 

Who let the punks out?

Yuga Labs, the company behind Bored Apes Yacht Club (BAYC), has bought the rights to CryptoPunks and Meebits from Larva Labs. Apparently, Larva Labs wasn’t well-liked by the CryptoPunk community since they refused to give exclusive licensing rights to the NFT holders. 

Yuga Labs, on the other hand, has granted Bored Apes owners full license with their NFTs, leading to various forms of BAYC-branded merch, ad campaigns, music and more. To that end, Yuga Labs’ first order of business after they bought CryptoPunks was to transfer IP, commercial and exclusive rights over to the NFT holders. Now go sicc em, punks!

In metaverse news, movie star Val Kilmer has created a virtual experience inside of the Somnium Space metaverse called Kamp Kilmer. In the teaser video you can see a film set and iconic pieces from Val Kilmer movies, like the Batmobile from Batman Forever. I imagine there will also be plenty of bat nipples and codpieces for your viewing pleasure.

Worldwide food prices jumped a record 20.7% over the past year due to supply chain issues and erratic climate changes among other things. Covid-19 may have started the supply chain bottlenecks but the war is taking it to a whole other level. 

Ukraine is one of the world’s largest grain exporters. But with the invasion, ports have been shut down and farmers have been forced to flee. Russia, another major grain exporter, is being sanctioned into oblivion. As a result of this, the food supply is being threatened and soft commodity prices are shooting through the roof.

Ever since the end of January, gold has damn near only gone up. Last Tuesday, gold climbed up to a record-high of $2,070.40 per ounce before it swiftly fell back down to the $1,919-$1,960 range. Do keep an eye on gold’s little brother silver in the coming weeks as well, with strategic metal supplies dwindling due shipping bottlenecks and economic sanctions.  

According to AAA, the U.S. national average price for a gallon of gasoline is sitting at $4.31. But some states have it worse than others, with California average pump prices currently at $5.75. 

The culprit? U.S. crude futures hit another record high this past week — $129 per barrel. The international benchmark Brent spiked to an eye-watering $138 per barrel. But they were obviously overbought and slid back to $100 or so per barrel. God bless the oil bears.

Welp, that lasted all of 40 days.

To the surprise of many, Tom Brady announced on Instagram that he’s returning to the Tampa Bay Buccaneers for his 23rd NFL season to settle some “unfinished business”. Brady is the latest in a long line of Hall of Famers, like Michael Jordan and Reggie White, who un-retired themselves after realizing that they don’t belong in the stands with the spectators.

As you would expect, Tom Brady cards, like this 2002 Topps Chrome Tom Brady #100 PSA 10 GEM MINT, saw an immediate uptick after the announcement. 

Before all the hoopla it was trading at $2,660, but now it’s worth $2,731. Lucky for you, Dibbs lets you buy fractional shares — so you don’t end up like this guy who bought Brady’s “last” touchdown football for half a million dollars. That’s gotta hurt.