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SEC Requests Authority To Better Police Crypto Trading

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In his Daily Market Notes report to investors, while commenting on SEC Chairman’s request to better police crypto trading, Louis Navellier wrote:

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Q2 2021 hedge fund letters, conferences and more

Earnings Surprises

We are two thirds through earnings announcement season. The entire market has posted a 17% earnings surprise and the average sell surprise is 3.8%. This is not as strong as the previous quarter, but it's still very good and we're still growing. Speaking of growth, we had an ADP payroll for today and it showed that we created 330,000 new private payroll jobs. However, economists were expecting 653,000. So, if you turn on the financial networks today, they will tell you that, "Oh my God, we're decelerating. The 10-year treasury yield is plunging." Which it is, but the bottom line is, it's not that bad. We just had the ISM Service Report come out and it's at record level.

The economic news this week was positive, but the news media continues to emphasize the negative points as the number of Covid-19 cases spread globally due to the highly contagious Delta variant. So it's an interesting conundrum we're in, we have to decide, is the glass half full or half empty? In my opinion, it's not only half full, it's going to get a little fuller, because we're still growing. Again, the ISM Services Index is at a record high, and that services are over two thirds of our economy. So we're still fine. There's still order backlogs out there. There's still bottlenecks at the ports. The economy's recovering.

10-Year Treasury Bond Fall Below The 1.2% Level

The biggest news is that the 10-year Treasury bond decisively fell below the 1.2% level, which just causes fixed income investors to pour into the stock market seeking higher yields. There is no doubt that these new investors have helped to propel the overall stock market substantially higher.  Since most investors do not know that the Fed has embraced Modern Monetary Theory (MMT) and the Federal Open Market Committee (FOMC) will keep interest rates ultralow, so I expect millions more new investors to pour into the stock market seeking high yields.

Modern Monetary Theory remains alive and well in Europe after the European Central Bank (ECB) boosted its quantitative easing and declared that it would not change interest rates until inflation reached a 2% annual rate.  The truth of the matter is that the U.S. is also embracing MMT and we are also on the path to negative interest rates, but first we have to break a few key thresholds, like the 10-year Treasury bond falling and staying below the 1.2% level for the foreseeable future.

At the rate of job creation that's going on right now, it's going to take over two years for those 6.8 million missing jobs, since the pandemic started, to be erased. That means our Fed is going to have to be accommodative for a long, long time.

What Do We Do?

Our economy has been permanently changed. We are more productive as a society, and that's resulting in record earnings and we have this unbelievably accommodated Fed. We have this Goldilocks environment of low interest rates, strong earnings that's going to persist all year and probably into next year. So the question is, "What do we do?"

The one thing I can tell you is I'd stay the course, but I just want you to know it'll get bumpy. It always does. The 10-year treasury is going to break 1% in the upcoming months, in my opinion. I don't mean to scare anybody, but that is monumental. There's just a fight for yield. So if you need yield, you better go get it. The dividend growth stocks are a classic, classic case of an example of where people are going.

SEC's Request To Better Police Crypto Trading

Some of the biggest news this week was that SEC Chairman Gary Gensler asked Congress to give his agency more authority to better police crypto trading, lending and platforms.  Specifically, Chairman Gensler on Tuesday called cryptocurrencies the “Wild West” that is riddled with fraud and investor risk.  Furthermore, Gensler added that some cryptocurrencies involve tokens (e.g., coins) that may be unregistered securities.  Gensler concluded by saying “We need additional Congressional authorities to prevent transactions, products and platforms from falling between regulatory cracks.”  Well that settles that because Chairman Gensler sounds like General Custer looking for a fight!  However, since Congress is going on a recess and 2022 is a midterm election year, it will be interesting if Congress actually finds the time to grant the SEC any authority to police the cryptocurrency market.

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Louis Navellier

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