Metrics Ventures Market Observations: Talk is Cheap
Metrics Ventures Crypto Market Secondary Fund July-August Market Observation Guide
1/ This was originally the title for July, but given that Warsh's remarks in July were simply too significant, we have appropriately extended the span of our monthly analysis. Unsurprisingly, the title carried over seamlessly. As of the date of this monthly report, Warsh's ineptitude has already been priced in by the rapidly steepening yield curve in the bond market. The dollar's problems are hardly something a single Fed chair can change or resolve—the process in between will ultimately be a series of disruptions.
2/ From a market perspective, we see U.S. equities and bonds continuing to view credit issues in divergent ways: after selectively clearing some leverage, the stock market has reverted to its previous blind-faith stance, while the bond and FX markets continue to mercilessly deliver votes of no confidence. The early bottoming of gold and silver has revealed a fairly clear central bank consensus—namely, that the era of competitive currency devaluation in the West no longer accepts verbal interventions, and the tide cannot be resisted. At this point, we are not concerned about a near-term further bursting of the U.S. equity bubble; rather, our attention is focused on how the next phase of liquidity release represented by FIMA will unfold.
3/ Looking ahead, in Q3-Q4 we remain bullish on rigidly constrained resources in the global supply chain, such as copper and electricity, as well as gold, which continues to price in the trend of currency untrustworthiness. For the digital asset market, we believe it will be difficult to see significant excess returns before excess liquidity release and the marginal growth rate of AI are fully priced in.
Market Overview and Trend Review:
Regarding market trends, our main views are as follows:
① Resource commodities such as gold remain, in our view, the preferred liquidity-absorbing assets over Bitcoin for the time being, and the consolidation over the past few months has been very healthy:
② The bull trend in RMB-denominated assets remains clearly intact, and there should be no excessive doubt. Take the STAR 50 Index, the core of this rally, as an example:
③ Not only have copper spot prices hit new highs first, but stock indices and currencies of key resource-rich countries are also nearing the endgame of directional selection:
Taking into account current FX and bond market trends, we lean toward the view that resource commodity stocks, including gold and silver, have reached the end of this consolidation phase. Considering that even after a rebound, the valuations of some assets are effectively offering generously priced call options on metal prices, and against the backdrop of an inevitably slowing marginal growth rate of AI, certain non-ferrous metal assets in the RMB market deserve close attention.
From a macroeconomic standpoint, we attach particular importance to the predictive significance of this round of coordinated U.S.-Japan FX intervention and the interaction between Warsh and Bessent for future Fed behavior. In fact, a Fed chair attempting to emulate Emperor Jiajing at the end of an empire is bound to be irrational, and the Treasury directly stepping in to use tools like FIMA to bypass the FOMC in service of the highest leader is the actual behavior that an honest body exhibits. As a friend put it: reduce communication, fabricate data, paper over the cracks—the Ming Dynasty can continue its revelry. Based on this, if one were to choose a strategy with clearly positive expected value on a three-year horizon, going long on non-ferrous resources would be an excellent choice.
