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Is There Bang In the Buck With Banks? The SPDR S&P Bank ETF (ticker: KBE) has risen 31.7% so far this year, 20% higher than the S&P500. This is partially the result of the traditional narrative that banks outperform as they lend out more money as the economy recovers. Looking more closely though, companies are exiting this most recent recession with 25% more cash on their balance sheets than before the covid-crisis, hence no need for capital and banks loans. Typically loan balances grow by around 4% annually…The first quarter of 2021 saw 1.2% drop compared to the previous year.
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The Second Master of Bitcoin: Many individuals view Elon Musk as the master of Bitcoin considering the large impact his tweets seem to have on the crypto currency. However, China should be looked at as a second, less-friendly Master as 75% of the bitcoin supply is mined in China. “Bitcoin mining” ranks as one of the top ten industries in the country in terms of electrical power usage (alongside steelmaking and cement production). All of this matters because Beijing is starting to disrupt the mining operations as Beijing begins rebranding itself to be more climate focused. This crackdown could have implications on bitcoin’s price moving forward.
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Big Tech Will Write A Check: The G7 finance ministers agreed to start working towards a final agreement to create a minimum tax of 15% for “the largest and most profitable multinational enterprises.” The announcement was missing exact details that will need to be worked out, but many believe the progress was partially the result of US Treasury Secretary Janet Yellen’s willingness to include American tech companies such as Facebook and Amazon in that definition. In previous discussion, the US had been seen as trying to protect its largest global corporations.
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Not Paid to Sit On Cash: In the largest leveraged buyout deal since the financial crisis Blackstone Group, Carlyle Group, and Hellman & Friedman have agreed to buy a majority stake in Medline Industries Inc, a family-owned company based in Chicago that sells medical supplies. Many view this deal as proof of massive capital raises by PE firms ($1.6 trillion dollars of dry powder) and can add low-interest debt onto the balance sheets of the companies they purchase. This Medline deal may have been made because it presents the opportunity for these large PE firms to put some cash to work.
Economic Calendar
Monday: Consumer credit (Apr)
Tuesday: NFIB Small business survey (May), Trade deficit (Apr), Job openings (Apr)
Wednesday: Wholesale inventories (Apr)
Thursday: CPI (May), Core CPI (May), Household wealth-year over year Q1, Federal budget (May)
Friday: Consumer sentiment (June prelim)
