Good afternoon. We're here to help you get ready for the week, one that promises more thrills, chills and everything else a bear market has to offer. Did anyone else notice that the yield on the 10-year bond eased down last week, from about 3.1% to 2.9%? Perhaps interest rates won't soar, after all. As for cryptocurrencies, that's another story.
Before he was exposed as the world's greatest Ponzi schemer, Bernie Madoff brooked no questions about his business. He wouldn't discuss his options-trading strategy or identify counterparties. Nor would he identify the party that kept track of client money by providing custodial services.
I'm not saying everyone who refuses to answer such questions is operating a Ponzi scheme. I am saying Ponzi-scheme operators refuse to answer them.
Last week those questions were asked of Tether, a cryptocurrency that calls itself a stablecoin because its value is supposed to be pegged to the dollar. After the peg broke last week, Tether said it wouldn't disclose which organization is providing custody of its $40 billion worth of Treasury bond holdings. Nor would it say where the assets are stored or which firms handle trading on its behalf.
"This is information that is privileged … we don't want to give our secret sauce," Tether's chief technology officer told the Financial Times. "Our counterparties are not public. We are not a public company."
If Tether's goal was to undermine faith in crypto, I can't imagine doing a better job.
Faith is especially important with crypto because there's really nothing else underpinning it. Crypto aficionados will argue faith is all that's behind the dollar, but there is at least one crucial difference: If you pay taxes using crypto, the IRS will come after you for nonpayment. The dollar keeps you out of jail.
The blockchain technology underlying Bitcoin and other crypto has never been hacked, and that's valuable. But Madoff's scheme wasn't totally worthless, either. More than $18 billion was recovered for investors who had been left with the impression their holdings were worth about $50 billion more.
The value of crypto has soared and plunged repeatedly since Bitcoin started trading 13 years ago. One of Bitcoin's distinguishing characteristics is remaining just as volatile as when it was an itty-bitty piece of code. Bitcoin and Ethereum have lost 55% of their value since November, and plenty of investors are confident crypto will rise again. But Bitcoin and the 19,000 other cryptocurrencies were spawned in a world with a 0% interest rate—which no longer exists.
It took 45 years for Madoff's historic fraud to unravel. Crypto, in its way, is historic too.
May 16
Two of the buzziest New York–based SPACs, Bark and BuzzFeed, report earnings. Their share prices have fallen sharply, and BuzzFeed is culling 30% of its newsroom. Bark, which sells dog-treat subscriptions, was acquired by a SPAC started by former Cosmopolitan editor Joanna Coles and Islanders co-owner Jonathan Ledecky after they met one rainy day outside a café in Amagansett.
May 17
Home Depot and Walmart report earnings. If inflation is prompting customers to change their shopping habits, the two retail giants will see it first. Consumer sentiment is—no surprise—dreadful.
The City Council holds a hearing on the state 421-a tax exemption meant to incentivize development of affordable housing. Gov. Kathy Hochul wants to end the exemption next month. Developers warn affordable-housing construction will grind to a halt without it.
May 18
Sleaford Mods perform at Irving Plaza. The English post-punk duo's songs have been described as "embittered rants about such topics as unemployment, modern working life, celebrities and pop culture, capitalism and society in general." Only in New York, kids. Only in New York.