Rising Interest Rates, ATHs for the Financials, Bitcoin $50k, Crypto Mania, VIX Term Structure, Buying Some CVS

February 17, 2021 at 4:01 am  ·  Category: Bitcoin, Fundamental Analysis, Interest Rates, Stocks, Twitter, VIX, YouTube

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The biggest story in financial markets Tuesday was the 825 basis point jump in the US 10 year treasury yield to 1.3%.

While the long end of the yield curve rose steeply, the short end barely budged increasing the 10 year – 2 year spread to almost 4 year highs.

This is excellent for banks who borrow short (checking accounts, savings accounts, CDs) and lend long, capturing the spread. As a result, the S&P Financials (XLF) finally hit a new ATH. The XLF’s second biggest component at 12.2%, JP Morgan (JPM), did as well.

The second biggest story of the day yesterday (Tuesday) was Bitcoin $50k. Bitcoin briefly touched $50k before retreating but is currently trading around $51.5k.

The secondary coins in the crypto market are also catching a bid and their combined market cap made a new all time high last week.

I’m not going to pretend to understand how the VIX Term Structure is constructed but the recent decline in the VIX has caused it to reach levels that have reliably signaled spikes in the VIX the following 2 weeks, 1 month, 2 months and 3 months (Chart Source: “Excess upon excess as Dumb Money is smart as ever”, Sentimentrader, February 16). Spikes in the VIX invariably correlate with corrections in stocks.

Meanwhile, I bought another consumer staple nobody cares about, CVS (CVS, market cap $93 billion), down 5% on what I thought was solid 2021 Adjusted Diluted EPS Guidance of $7.39-$7.55. That means CVS is trading for < 10x 2021 Guidance with a 2.84% dividend. Yes please!

Posted by Greg Feirman  ·  Trackback URL  ·  Link