Wall Street Breakfast

Author: bmotrader   |   Latest post: Wed, 23 Jun 2021, 10:49 AM


Wall Street Breakfast: Musk Keeps Roiling Crypto

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Cryptocurrency is still under pressure this morning following tweets from Tesla (NASDAQ:TSLA) CEO Elon Musk that rattled the market over the weekend. Bitcoin (BTC-USD) is down 8% to about $45,000, but it's off its lows today of just below $43,000. Ethereum (ETH-USD) is off 9% to around $3,500, with earlier lows nearing $3,100. Dogecoin (DOGE-USD) is down 5.5% to about $0.59, having hit $0.45 earlier. "To clarify speculation, Tesla has not sold any Bitcoin," Musk tweeted just before 2 a.m. ET. A Twitter war broke out over the weekend between Musk and bitcoin fans, with Musk suggesting Sunday that Tesla has already or intends to unload its $1.5B in bitcoin holdings.

Musk was "taking on all comers on Twitter over the weekend and caused some chunky gyrations across the coins," Chris Weston, head of research at Pepperstone Group, writes in a note, according to Bloomberg. Musk began Sunday afternoon by making fun of MicroStrategy's (NASDAQ:MSTR) Michael Saylor, and things devolved from there. At one point, Musk pointed out that he's the guy behind PayPal (that's arguable), and how dare Bitcoiners try to tell him how money works. That provoked the natural response that Bitcoin is the anti-PayPal (decentralized vs. centralized).

Musk's outsize influence: The Tesla chief executive has found himself, and his huge social media following, as one of the arbiters of cryptocurrency sentiment of late. His mentions of Dogecoin have led to buyers flocking to the meme crypto that was started as a joke and he dubbed himself "Dogefather" in a promo tweet for his appearance hosting Saturday Night Live, which led to intense interest about how the coin would be worked into any sketches. He sent shockwaves through the crypto world last week when he said that Tesla would no longer be accepting bitcoin as payment because of his concerns about the amount of energy used in mining coins. Bitcoiners pointed out the fallacy in Musk's reasoning, noting mining has nothing to do with bitcoin transactions and everything to do with securing the network. He later expressed his confidence, saying "I strongly believe in crypto."

Twitter (NYSE:TWTR) and Square (NYSE:SQ) chief Jack Dorsey has also weighed in, but has had limited impact. Dorsey tweets that Square will "forever work to make bitcoin better" because it changes "everything" for the better in response to a report that Square had halted purchases after a $20M loss.

Frothiness: There is also an argument that Musk has given crypto holders a convenient reason to sell given the lofty heights hit. Riskier assets have faced pullbacks recently, with the Nasdaq falling for the fourth straight week, the first time that has happened since 2019. Tesla lost more than 12% last week. Bitcoin is down nearly 30% from its high in mid-April, but has still quadrupled over the past year.
M&A - AT&T, Discovery look set to combine media assets

AT&T (NYSE:T) is said to be in talks to combine its media business with Discovery (NASDAQ:DISCA). A transaction may be announced as early as this week, according to a Bloomberg report. The companies are still working on the structure of a deal and details may change. The deal will likely combine Discovery with all of AT&T's WarnerMedia, which will become a new publicly traded company, co-owned by AT&T and Discovery, according to a CNBC report.

AT&T is expected to own a "big" stake in the new entity and a transaction could come as soon as tomorrow, according to The Wall Street Journal. The companies are looking to combine Discovery's realty-TV programming with AT&T's media holdings - including HBO, TBS, TNT and the Warner Bros. studio - to be more of a competitor to Netflix (NASDAQ:NFLX) and Walt Disney (NYSE:DIS). Discovery's networks include HGTV, Food Network, TLC and Animal Planet.

Tech - Microsoft investigated Bill Gates relationship

Microsoft's (NASDAQ:MSFT) board reportedly concluded in 2020 that Bill Gates needed to step down from the company's board after looking into a romantic relationship Gates had with an employee 20 years before.

"Microsoft received a concern in the latter half of 2019 that Bill Gates sought to initiate an intimate relationship with a company employee in the year 2000," a Microsoft spokesman told The Wall Street Journal. "A committee of the Board reviewed the concern, aided by an outside law firm to conduct a thorough investigation. Throughout the investigation, Microsoft provided extensive support to the employee who raised the concern."

Gates' spokeswoman acknowledged "an affair almost 20 years ago that ended amicably," but said that Gates stepping down from the board had nothing to do with it.

Financials - Housing market gets sized up as prices skyrocket

Investors will be eyeing several housing market indicators this week, with the real estate sector seeing some of the fastest price growth in more than a decade. The National Association of Home Builders' monthly index will be published on Monday and is expected to hold steady at April's robust figure of 83. Building permits and housing starts figures released Tuesday are also forecast to stay strong, given a significant lift from buyer traffic, vaccinations, stimulus checks and the spring season.

Bigger picture: The numbers are expected to show resilient homebuilder confidence and buyer demand despite a near doubling of lumber prices and logistical supply issues. A lack of residential construction over the past decade, as well as pent-up demand from COVID-19 shutdowns, has unleashed a seller's market nationwide. According to the National Association of Realtors, the median price for a single-family home rose about 18% in March to a record high of nearly $335,000.

It's not only in the U.S.: Among the 37 OECD countries, real house prices climbed almost 7% between the fourth quarter of 2019 and the fourth quarter of 2020, marking the fastest year-on-year growth in the past two decades. "If you lock up the vast majority of the population for months, they [rapidly reassess] what they want from their homes," said Richard Donnell, research director at U.K. property platform Zoopla. It also didn't take long for a "race for space" to take hold as people were forced to transform their houses into offices and classrooms.

Outlook: "Borrowing remains cheap and, once borders reopen, foreign investors will provide even further impetus to property markets, where purchasing activity has been largely driven by domestic buyers," noted Kate Everett-Allen, head of international residential research at real estate consultancy Knight Frank. Economists also say it will take some time for construction to catch up to demand, especially for entry-level homes.

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