Before the Bell: Winter Arrives for Crypto

The U.S. manufacturing sector continues to contract, interest rates rise anyway. Bargains among holding companies? Certainly not across the board.

The first trading day of the darkest month of the year did not extend last week’s rally. The Euro Stoxx 50 barely stayed afloat with a “gain” of 0.01%. Wall Street slipped roughly half a percent. The yield on ten-year U.S. Treasuries jumped 7 basis points to 4.08%. This came despite the ISM manufacturing index falling to 48.2 — its ninth consecutive month below the 50-mark that signals contraction. One might expect bond yields to fall on such data, but rising Japanese yields and a stronger yen are proving far more influential. The Bank of Japan is expected to raise interest rates further, and Japanese government bonds have already moved decisively away from zero. As a result, the yen has strengthened and countless carry trades funded with cheap Japanese credit are being unwound.
The renewed sell-off in bitcoin (-5.6%) and other crypto assets draws fuel from the same source. Few major price moves elsewhere: Airbus fell 5.8%, while Air France-KLM gained 7.6%. Recticel jumped 8.5% following Friday’s acquisition announcement — a glimpse of what may happen if the construction market revives.

In Asia, equity indices trade largely unchanged. In Brussels, Jensen announced a U.S. acquisition after Monday’s close, and Biotalys finally secured U.S. regulatory approval for its bio-fungicide. The EU publishes inflation data today, and central bank officials on both sides of the Atlantic are scheduled to speak. On Wall Street, we await earnings from CrowdStrike Holdings and AI-chip designer Marvell Technology.

Black Friday Not Over for Holding Companies

Rising markets typically compress discounts in holding companies — but not this time.
According to Joren Van Aken (Degroof Petercam analyst, well-known to many Spaarvarkens followers), the 25 holding companies he tracks now trade at an average discount of 32%, the highest in more than a decade. Last month the discount stood at 30.5%. The widening gap is most pronounced among less-traded vehicles: Compagnie du Bois Sauvage, Peugeot Invest, Gimv, Solvac, Tubize, Latour and Luxempart.
Tubize remains our preferred way to ride the UCB uptrend, and within the 5G-portfolio Jim currently holds four holdings. Van Aken himself highlights Peugeot Invest — major shareholder of Stellantis — now trading at a stunning 57% discount.

Strategy Toward Self-Destruction

America’s MicroStrategy was once a software company that thought big — so big it eventually dropped the “Micro.” Strategy (-4.4% Monday, -60% since summer) reinvented itself as a leveraged bitcoin vehicle, taking on debt and raising large amounts of capital to buy crypto. At bitcoin’s manic peak — now presumably behind us — MicroStrategy even traded at a hefty premium to the value of the bitcoin it owned. That premium has evaporated as crypto prices fell, causing MicroStrategy to drop nearly twice as far as bitcoin itself.
Today the company reportedly trades at a 10% discount to the market value of its holdings. But even the deepest discount would not tempt us into this “stock,” which could run into trouble quickly should it need to pay preferred dividends to investors who bought shares during capital raises. When speculation becomes corporate strategy, the endgame writes itself.

Did you know…

Brussels has its own MicroStrategy?
Oxurion, once a failed biotech, is now issuing shares simply to buy bitcoin. The stock trades at one euro cent. One wonders why this ghost listing is still allowed to exist.

This article was translated from Dutch and was originally published on Spaarvarkens.be.