AM Brew, Jun 20th 2022

There is no trading today in observance of the Juneteenth holiday. Stoxx Europe is up 0.7% and the big news of the weekend was Crypto's steep drop on Saturday followed by a bigtime rebound on Sunday. Bitcoin dropped to the $17,000 level, a huge drop, then came all the way back to $20,600. Other crypto coins followed suit. What a wild ride.

Real estate professionals are in a bit of denial right now. A lot of the real estate data is still strong ( lack of listings, percent selling above asking, percent sales in first 2 weeks - all are still strong ), but 2 charts illustrate the weakening truth:

As of 2 weeks ago, those with good credit could still get a 3 year adjustable mortgage for 2.75%. Today the best deal is 3.5% and its going to 4%, so things are still getting weaker. Its not a good time to buy property.

Most importantly, oil markets retreated in anticipation of a slowdown. We doubt that this will hold - it doesn't appear that people are driving less or turning off their AirCon. Our best guess is that you should be long energy for the next few weeks as pricing firms up.

Currently, investors have a few strategic options: (a) trade the volatility ( assuming you have a model to outperform ), (b) sit on the sidelines with cash & wait for a great valuation, (c) sit on the sidelines and wait for confirmation ( either via Fed dovishness or better market action. With inflation running at 8%, eventually you need to invest in something: you can be early or you can be late to the party. We think the name of the game is caution until the markets make a pricing mistake, which is when you can go big enough to gain outsized returns. Enjoy the respite from the volatility.

Wealthyretirement.com published an interesting thesis that Mexico is going to be the beneficiary of de-coupling from China. Almost certainly, China will be wanting to re-unite Taiwan, and at a minimum, this will create a lot of tension but at a maximum could result in massive supply issues in prescription tablets, battery graphite, silicon solar panels etc. Mexico does look like a good bet right now, at least it doesn't need to be zero. We will be asking smart people what they think, and if we get good responses we will share them with you.