28th March 2024 > > Larry Fink & Hong Kong.

tl;dr

Larry Fink knows his stuff, but apart from that, it’s all about Hong Kong.

Market Snap

Market Wrap

Larry Fink – founder and CEO of the world’s largest asset manager – and I usually agree on issues that we think are pressing. I frequently bang on about the sheer unsustainability of the size of the US government’s debt. Larry has never disagreed with me on that topic, however often I raise it. Now, he has gone public with his own concerns.

He has described the situation as “snowballing” and “very dangerous”. All of that is very clear.

I am out on a limb, not for the first time, stating I believe that QE is heading back our way soon. It is not the view of the lazy, those who blindly follow the consensus. And Larry, bless him, is not going to go that far in his public statements. But he did allude to it:

“Three years ago, the rate on a ten-year treasury bill was under 1 per cent. But as I write this, it’s over 4 per cent and that three-percentage-point increase is very dangerous. Should the current rates hold, it amounts to an extra trillion dollars in interest payments over the next decade.” (Emphasis all mine).

Let’s look at the boxes that have been ticked in our daily missive over recent times that suggest QE will be back.

Yield curve inversion and no recession, the flight to corporate bonds, the crisis brewing for all mid-sized US banks now that the clock is ticking on BTFP loans that mature next March 10th, the incessant rise in the values of all hard assets versus fiat, and the total absence of money-printing induced inflation in open economies. Need I go on?

And now Larry and his pitch.

Rates are going down, and going down dramatically. Get yourself ready, if you agree with me.

Curious Cryptos’ Commentary – HSBC and tokenisation

This story is not strictly about cryptos, for it is based around HSBC’s private blockchain platform, HSBC Orion.

Private blockchains offer some, but not all, of the advantages of public blockchains. They are neither immutable, nor transparent to the world. By definition, they are centralised as were all systems for processing data prior to the glorious day of the Genesis Block. But for financial organisations in particular, they offer some key advantages over legacy database validation and security protocols.

As we are forced to discuss the iniquities of CBDCs, and their primary purpose of enforcing coercion and control over us as individuals (CBDCs run on a private blockchain) we can certainly discuss other private initiatives to see if there is any insight to be gained to help us understand the decentralised world.

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HSBC has announced that its retail customers in Hong Kong can access a tokenised gold fund using the bank’s online banking and mobile app. Its name – the HSBC Gold Token – suggests rather refreshingly that HSBC’s marketing and branding division are good, solid, down-to-earth people. I can think of some other companies that might have taken the opportunity whilst naming a new product to try to express some values and beliefs that might turn out to be ephemeral. Values and beliefs that are certainly not germane to the business itself.

Maggie Ng, general manager and head of wealth and personal banking Hong Kong at HSBC, explains:

“We are proud that HSBC Gold Token, powered by HSBC Orion, is the first retail product in Hong Kong that is based on distributed ledger technology, as authorised by the Securities and Futures Commission.”

HSBC is leading innovation in the financial services world harnessing blockchain technology, both public and private. This initiative adds more heft to the argument that tokenisation is set to revolutionise finance.

What will be interesting – and we do not yet know the answer – is whether customers will be content with a private solution, or will demand the extra benefits of a public solution.

My bet is on the latter, but there is the very remote possibility that I might be mildly biased on some topics.

Curious Cryptos’ Commentary – Spot BTC ETFs in Hong Kong

Those old hat stories about China “banning” crypto are looking a touch out-of-date.

Asset Manager VSFG has applied to the local regulator SFC (Securities and Futures Commission) to launch a spot BTC ETF. It will join a queue that is reported to be ten strong already, with more proposals in the pipeline.

The SFC has stated it "is prepared to accept applications for the authorisation of other funds with exposure to virtual assets, including virtual asset spot exchange-traded funds.” If that isn’t a come-on then I have been sorely mistaken for much of my life, and I must fulsomely apologise in retrospect.

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Nothing happens in Hong Kong without the prior knowledge of the murderous President Xi and his henchmen enforcers. Indeed, in the quote from Maggie above, I was intrigued by the use of the word “authorised” rather than “approved”, which I think is illuminating in itself.

Though I doubt that spot BTC ETFs will appear on mainland China anytime soon, you have to feel pretty confident that a decent chunk of the ill-gotten loot plundered by members of the CCP’s Politburo will be destined for Hong Kong. It may even be the case that Xi has agreed to allow the ETFs as another bribe to keep the CCP on his side.

Though it is morally repugnant, and I wish it were not the case, this is another avenue of demand for BTC, and there is nothing I can do or say that will change that fact.