Market Commentary: Tackling Blockchain

Published February 5, 2019

Nevada lost its monopoly on sports gambling last May with a Supreme Court ruling in a case brought by New Jersey, so this year’s Super Bowl saw legal betting for the first time not only in the Garden State but also in Delaware, Mississippi, West Virginia, Pennsylvania and Rhode Island. The NFL championship game is of course one of the most heavily wagered sporting events of the year. One of every ten Americans was expected to bet on The Game, gambling a total of $6 billion on the Rams or Patriots — or on a related proposition, such as the length of the national anthem. In addition to the regulated sportsbooks, a good percentage of such bets are still being made illegally through bookies or offshore online sites according to the American Gaming Association. Some are now placed on cryptocurrency gambling platforms. Digital currencies themselves are also the subject of much speculation. Super Bowl LIII sports fans bet on whether Bitcoin itself would rise or fall over the weekend. As it turns out the price of one Bitcoin dropped by 0.74%. In the past year since the 2018 Super Bowl, the price of Bitcoin has fallen more than 50% to $3,409. The average cost of a Super Bowl ticket fell about 18% to $4,380 and the final 13-3 score was the lowest on record.

Bitcoin and the blockchain technology underpinning it were invented by Satoshi Nakamoto, an unknown person or group of people, and first appeared in 2009. Those interested in learning more about how blockchain is revolutionizing industries including healthcare and senior living are welcome to join us in Clearwater Beach on February 27 at the Sims Late Winter Conference. Manuel Stagars, an economist, strategist, music composer, and award-wining filmmaker who directed the documentary, The Blockchain and Us, will be one of our featured guest speakers.

On Capitol Hill, all kinds of bets were made by staffers and lobbyists ahead of the rescheduled State of The Union Address on Tuesday. How many times would the speech be interrupted by applause? How many minutes would it last? Would the President mention Russia? How many times would he say “wall” or “huge”? Would the First Lady wear a blue dress? The eyes of the world are always on the House Chamber for this annual presidential update and announcement of legislative and policy priorities. Meanwhile, economic and political chaos reigns in Venezuela and in Asia the beginning of the Lunar Year of the Pig is being marked by major celebrations. The British Prime Minister is traveling to Brussels in an effort to avoid a disorderly no-deal Brexit and the Pope is making an historic visit to the Arabian Peninsula. On Wall Street, more corporate earnings, and economic releases delayed from the government shutdown, are being reported, and traders impatiently await any sign of traction in China trade talks.

Last week, Senator Cory Booker became the 10th Democrat to announce a 2020 presidential campaign and former Starbucks CEO Howard Schultz announced that he was considering an independent bid. January payrolls came in much higher than expected at 304,000 while December numbers were revised downward to 263,000. Among other major news, Pacific Gas and Electric, California’s largest utility, filed for bankruptcy. The market recaps for January showed that it was a good month for and bonds, and stocks had the best start to the year in more than a generation. After the reference to “patience” in the Federal Reserve policy statement, investors felt confident in betting that there would be no interest rate hikes this year. The Dow and the S&P 500 indices finished more than 7% higher at 24,999 and 2,704 while the Nasdaq added nearly 10% to close at 7,281. Oil prices increased by $8.38 a barrel to end at $53.79. Gold and silver prices rose by more than 3% respectively to $1,322 and $16.06 an ounce. Treasury yields fell across the board. The 2-year dropped 3 basis points to end the month at 2.45%, the 10-year fell 6 basis points to 2.62% and the 30-year finished 2 basis points lower at 2.99%. Municipal bonds generally outperformed governments. The 2-year AAA general obligation bond yield plummeted 13 basis points to 1.65%, the 10-year sank 11 basis points, and the 30-year benchmark close flat at 3.02%. Mutual fund investors added $4 billion to municipal bond funds, including $1.4 billion to high yield funds, while withdrawing $9.6 billion from taxable fixed income funds and $7.6 billion from equity funds.

In January, $247.9 billion of municipal bonds traded, averaging $11.8 billion daily, a level approximately $800 million higher than December. We saw little price movement during the month and the S&P Municipal Bond Index returned +0.73%. The most actively traded munis included Puerto Rico, tobacco, taxable New York paper and Texas notes. The Bond Buyer Revenue Bond Index (a composite of 25 revenue bonds maturing in 30 years with an average rating of A+) closed the month at 4.69% up from where it began the year at 4.58%. SIFMA reported $24.1 billion of new issuance, including the $183.1 million Baa3 rated California Pollution Control Financing Authority bonds for the San Diego County Water Authority Desalination Project structured with 2045 term bonds priced at 5.00% to yield 3.83%. Also in the high yield sector, the Dallas Area Municipal Authority in Pennsylvania sold $29.2 million of Baa3 rated revenue bonds for Misericordia University including 30-year term bonds priced at 5.00% to yield 4.65%. And the City of Forest Lake, Minnesota had a $21.4 million non-rated charter school lease revenue bond financing for Lake International Language Academy featuring 2050 term bonds priced at 5.375% to yield 5.32%. The 30-day visible supply of municipal bonds totals $9.6 billion, including a $32.5 million non-rated Florida Capital Trust Agency financing for Pineapple Cove Classical Academy and a $12.3 million non-rated California Public Finance Authority deal for LaVerne Elementary Preparatory Academy.

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