Update - May 11, 2021
Our MAP Leads the Way in a New Reality
If you needed any more proof that “things ain’t what they used to be,” here it is… straight from our portfolio.
CME Group (CME) just made two big moves.
First, it has permanently closed its open outcry trading pits. And second, it has launched Bitcoin options and futures on its exchange.
It’s out with the old and in with the new.
The death of the open outcry pits is nothing new or astounding. They’ve been closed since the start of the pandemic last year and now prove to be not all that useful in the world of online data. Computers can make the trades faster and more efficiently than humans ever could.
But it is quite interesting that Bitcoin derivatives are popping up at the same time as the iconic trading floor is closing for good. It signifies a great sea change.
The addition of Bitcoin futures and options does a lot for the market. It brings greater price discovery and hedging, and allows for investors and traders to better manage their overall portfolios.
During our “Old Guy’s Guide to Crypto” mini-seminar last week, I talked about the many ways the current crypto bull run is different from what we saw in 2017. I showed why what’s happening in cryptos now is much less speculative than what we saw four years ago. This move from CME is just another example.
It’s one step closer to making crypto a reliable asset class.
We’ve got a long way to go before it hits that mark… but it’s marching steadily toward that goal.
Profit opportunities abound along the way.
Gold on the Rise
This massive transformation and the investing volume it’s bringing with it are exactly why I recommended CME and why crypto gets a big 10% allocation in our Modern Asset Portfolio.
Folks who have followed the model have done quite well.
Really, we have only one laggard in the portfolio. It’s our insurance play… gold.
But look at the chart. Gold’s price is climbing steadily…
I wrote recently about how China is once again opening its borders to gold imports. Local prices had dipped significantly below the world’s spot price, forcing Beijing to halt imports last year. But now that the economy is coming back to life, prices have jumped above the spot price.
China opened its doors in mid-April… almost exactly when the price of gold jumped out of its recent range.
Because of this, I remain quite bullish on gold.
Helping things, of course, are growing fears of inflation. It’s the topic everybody is talking about.
Reading through the bevy of earnings reports released in the past week, I see rising input costs are a growing theme.
Manufacturing giant Whirlpool (WHR) said, “The global material cost inflation in particular in steel and resins will negatively impact our business by about $1 billion. We expect cost increases to peak in the third quarter.”
The folks at Ford (F) said, “We’re definitely feeling the commodity headwind. And inflation, it feels like we’re seeing inflation in… parts of our industry kind of in ways we haven’t seen for many years.”
This line from Southwest Airlines (LUV) was quite amusing…
Outside of salary, wages and benefits, the largest drivers of our sequential cost pressure are flight-driven cost increases and landing fees, employee, customer and revenue-related costs, and maintenance expense…
So, um, pretty much everything?
But as consumers on the watch for rising prices, this note from PPG Industries (PPG) – a company that has its hands in a bit of everything – is quite telling:
We experienced a significant acceleration of raw material and logistics cost inflation during the quarter. Coming into the year, we were expecting an inflationary environment and had prioritized selling price increases across all of our businesses. This has helped us achieve solid price increases year to date. With a higher inflation backdrop, we have already secured further selling price increases and are in the process of executing additional ones during the second quarter.
Bottom line… prices are rising. And they’re rising for just about everything.
It’s good news for us and our stake in gold. We’ve spent the last six months preparing for price shocks.
It’s clear things are changing. They aren’t what they once were.
But that’s okay. Our portfolio is perfectly poised to take advantage of the action.
Be well,
Andy