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- No BS. Just Bullish.
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Hawk | Two
The Wall Street Skinny
December 19, 2024
This Week on The Floor
Sorry, I couldn’t help myself with the title of today’s newsletter.
The markets aren’t quite ready to call it quits on 2024, so we’ve got lots to discuss in this issue.
We’ve made all our Masterclasses available to purchase for just $25 apiece! Purchase now before prices rise in the new year:
Surprise hawkishness out of the Fed Meeting yesterday
Fartcoin: a big run-up, and a bigger conversation about the role of AI in investing
Markets Recap / Deal News
Interviewing this week? Here’s some content for your conversation.
Yesterday’s Federal Reserve meeting surprised the markets.
No, it wasn’t that they cut rates by 25 basis points (0.25%).
And it wasn’t that they committed to reducing the size of the Fed’s balance sheet (quantitative tightening).
Instead, the big surprise was the Fed’s hawkish* tone.
In his Q&A, Powell’s tone changed CONSIDERABLY from prior meetings.
All of a sudden, inflation appears to be a concern again.
Referencing potential policy from the new administration, he mentioned the potential for tariff-driven inflation impacting monetary policy in the near term.
Powell talked about being “at or near a level that will make it appropriate to slow the pace of adjustment”.
How can a rate cut be hawkish, you ask?
One senior strategist raised the possibility of this being almost a “mea culpa”. She theorized this is as close to admitting they cut too fast at the beginning of the current easing cycle (when they cut 50 instead of 25 bps that the market expected) as we’ll ever get.
Other pundits suggested the reversal in tone was politically motivated given its timing in the last month of the current administration despite minimal material changes in actual inflation data.
Either way, markets had a strong reaction.
Both equities and rates sold off considerably, before regaining ground today.
Prior to the meeting, markets had been pricing in 4 additional rate cuts in 2025.
Thanks to the Fed, we’re now expecting only two.
And some players are even positioning for a hike in 2025.
*when we say “hawkish”, it means being tougher on inflation, leaning towards tighter monetary policy, and pointing towards higher rates.
Potential interview questions:
If monetary policy is tighter than previously expected in 2025, what does that mean for corporate valuations? Equity prices? M&A activity? IPOs?
All else being equal, should the Fed’s hawkish tone flatten or steepen the yield curve?
What are the most important economic indicators that the Fed will look to before its next rate decision?
Check out today’s episode of The Skinny On… where we get into more detail on these topics and more!
Brace Yourselves. We’re Talking about Fartcoin.
Add to the list of things I never expected to put on my editorial bingo card: Fartcoin.
Yes, that’s right — the eponymous Solana-based memecoin briefly topped a $1bn valuation yesterday despite most meme-coins (and risk assets as a whole) getting hurt by the Fed’s hawkish tone.
Should I swap my holding of SPX for Fartcoin?
So what’s really going on?
Digital currencies as an asset class have been buoyed by the pro-crypto sentiment following Trump’s election in early November and the subsequent replacement of Gary Gensler as head of the SEC with Paul Atkins, a self-proclaimed crypto enthusiast.
But there’s considerable distinction to be made between names like Bitcoin (off the highs, but still hovering around $100k) and something like Fartcoin and its ilk.
The former represents a currency in which digital payments do transact, based on blockchain technology, with a limited supply of 21mm coins creating additional scarcity value.
Memecoins like Fartcoin belong to a class of “alt-coins”, an umbrella for non-Bitcoin cryptocurrencies. Amongst alt-coins are stablecoins (which are pegged to some other “real” asset class, like the US Dollar for example), or other household names like Ethereum and Solana.
Unlike Stablecoins, memecoins have no underlying value and can’t be used for transactions like Bitcoin. They are purely speculative instruments, often created as a joke.
Fartcoin is a Solana-based memecoin, alongside other memorable names like Peanut the Squirrel (PNUT) and Goateus Maximus (GOAT).
Many have wondered why this particular coin has experienced such a meteoric rise.
“Just listen to the AI crypto prophet, it’ll all be fine…”
One potential factor is the impact of Truth Terminal.
Truth terminal started as an AI-powered art project that attracted considerable attention from its X-based conversations. And one of those conversations was with billionaire tech investor Marc Andreessen, who apparently sent the bot $50,000 in Bitcoin.
Truth Terminal proceeded to invest its newfound riches in several memecoins, GOAT and Fartcoin among them, all the while cultivating a persona of crypto-prophet on X.
Truth Terminal’s musings on cryptocurrencies have taken on a life of their own, drawing more investors to these memecoins and inflating the size of its crypto wallet to a reported $40mm+ as its own holdings have increased.
While many may dismiss the run-up as just another fad for the Reddit community, it does point to the real impact of AI in the investment landscape in a new, potentially concerning, way.
This is not the secretive trading algo of yore, but rather an active participant in daily conversations with countless investors around the world, all of whom are putting real money at stake alongside it.
The implications of this kind of development are not to be taken lightly — and thus, dear friends, we are all forced to watch what happens with Fartcoin and learn.