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Morning Coffee: Dow plunges amidst trade war talks, BTC spikes thanks to Square

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Stocks and Securities

U.S. and world equities continue to be under significant pressure this morning as President Donald Trump said he would impose tariffs on an additional $200 billion worth of Chinese goods if Beijing goes through with its promise to retaliate against the US tariffs announced on Friday.

China responded to the latest threat by accusing the United States of “extreme pressure and extortionist behavior,” warning it would “strike back hard.”

Taking a longer-term view and more importantly, foreign governments pulled back their purchases of longer-term U.S. debt as trade tensions have escalated. The declines are relatively small so far for notes and bonds coming in just shy of $5 billion each for March and April, the most recent months for which Treasury data are available but it signals a bond market coming under continued pressure. While we are aware our readers are equity and crypto investors, we feel compelled to hoist the “caution flag” in anticipation of rising rates in the future albeit at a modest pace.

One of the larger declines has come from Russia, which cut its holdings of U.S. debt nearly in half from March to April, from $96.1 billion to $48.7 billion. Russia’s Treasury ownership peaked at $108.7 billion in May 2017. China, the largest owner of U.S. debt, reduced its level by $5.8 billion in April to $1.18 trillion, while Japan, the second largest, cut its holdings by $12.3 billion to $1.03 trillion. Ireland, the U.K. and Switzerland also pulled back. Foreigners held $6.17 trillion of the total $14.84 trillion of Treasury debt outstanding through April. When counting all U.S. government debt, the April decline came to $47.6 billion, a 0.8 percent reduction from March.

Cryptocurrency and Blockchain

In the crypto arena, Bitcoin spiked suddenly Monday afternoon following news users of the “Cash” mobile payments app could trade the cryptocurrency in New York as New York’s Department of Financial Services granted Square a virtual currency license. Bitcoin gained more than 4.5 percent to $6,794. Cash is owned by Square and has 7 million monthly active users. Bitcoin trading launched for most Cash users outside of New York in late January.On the volume front, Cryptocurrency volumes have dipped to a two-month low, with levels resembling those seen earlier this year during April’s downtrend. As of last night exchange volume has collectively dropped under $10 billion dollars, with these levels being seen in early April. The collective exchange volume is currently down over 80{d745bfe1f0a8cfaf7934723e820c1a1fdf298af2e9634a8abb073c3029806a15} since the large influx seen in early January, which topped out at an eye popping $68 Billion in 24 hours. Nevertheless, trading volume present with a specific asset, or asset-class, has long been held as a significant indicator of the market’s interest in an asset. With some critics keeping this ideology in mind, they have suggested that investors are losing interest in the industry. Despite these fears, cryptocurrency and blockchain development is still at all-time highs, with institutions continuing to become more interested in the space… though in a stealthy way.


Stocks on the radar

Annaly Capital Management (NLY)

Annaly Capital Management (NLY)   –  With U.S. equities under significant pressure this morning we decided to look at a yield play in Annaly Capital Management.  As a REIT, Annaly must distribute at least 90{d745bfe1f0a8cfaf7934723e820c1a1fdf298af2e9634a8abb073c3029806a15} of its taxable income to shareholders to qualify for pass-through tax treatment. If it does so, then Annaly doesn’t have to pay corporate income taxes on its earnings. The reason that an otherwise  company like Annaly hits our radar stems from the size of its dividend payout. At present, shares of Annaly yield 11.4{d745bfe1f0a8cfaf7934723e820c1a1fdf298af2e9634a8abb073c3029806a15}. That’s almost six times greater than the 1.8{d745bfe1f0a8cfaf7934723e820c1a1fdf298af2e9634a8abb073c3029806a15}  yield on the S&P 500. In addition to the dividend, NLY trades at a slight discount to its book value which could lend support to its share price during turbulent equity markets.



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Dr. Tiam Feridooni

Written by: Dr. Tiam Feridooni MD, PhD, BSc Dr. Feridooni, graduated from Dalhousie Medical School in May, 2018. Prior to enrolling in medical school, he completed his Bachelor of Science with Honours in 2010 in Biochemistry. He then obtained his PhD at Dalhousie University in Pharmacology in 2014, with a focus around regenerative medicine and stem cell transplantation. Dr. Feridooni has been published numerous high impact journals and has also co-authored a few books.

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