Is (GS) Outperforming Other Finance Stocks This Year?
(Bloomberg Opinion) -- As coronavirus vaccines approach a widespread rollout, the next six months of economic activity are going to be dominated by the impact of society's growing immunity — and easing fears. Combined with historically low levels of housing inventory, that could make the traditional spring homebuying season a particularly frustrating one for buyers.Recent housing data show how tight inventories already are. The supply of existing homes fell to 2.5 months in October, a record low for a period when normal inventory levels are four to five months of supply. For new homes, the months’ supply of inventory fell to 3.3 in October, also a record low. Real-time inventory data from Altos Research show that the supply of homes on the market continues to be down more than 40% year-over-year. This is one reason sentiment from homebuilders is at record-high levels and why home-price growth is accelerating.Now layer on the timing for potential vaccine rollouts. Goldman Sachs forecasts that half of Americans will be vaccinated by May. When you consider that some people have acquired natural immunity through infection — perhaps as many as 30% — it's possible that the U.S. could be approaching herd immunity by late spring. At the least, we should see far less spread of the virus than we've seen since the onset of the pandemic.That portends a V-shaped recovery by the middle of next year in areas of the economy hardest-hit by the pandemic. While questions will remain about business travel and going into the office — activities that may see permanent shifts from the pandemic — there will be a rise in employment and demand for travel and leisure industries.That should have positive second-order effects even for workers and consumers who haven't been directly affected by the pandemic. Workers who didn't lose income may have increased their savings for fear they might yet get laid off. The abatement of that risk should give them more confidence to spend.That could mean a new cohort of U.S. households looking to buy homes in the spring. While the pandemic accelerated the purchase plans of many renters, there was also the view among some people that a pandemic is a poor time to make a big financial decision, such as buying a house. It's these households that may decide that early 2021 is their time to buy, only to run into the challenges of low inventories and high prices.There might be some offsetting factors on the supply side. Some homeowners who decided not to list their homes for sale during the pandemic may now choose to do so. And an end to foreclosure moratoriums, which contributed to the inventory shortage by holding homes off the market in 2020, could increase supply in 2021. Post-pandemic market signals might also lead households to make different decisions than they would have a year ago. Let's say home prices are 12% higher in the second quarter of 2021 than they were at the end of 2019. Meanwhile, apartment rents have fallen in many cities, particularly high-cost cities like New York and San Francisco.It's possible that the rent-versus-own math may have shifted as much as 30% toward renting rather than buying by May. For those so inclined, it might be a better financial move to rent for a while at a bargain price rather than getting into bidding wars for suburban homes selling at elevated prices. This sort of dynamic could help rebalance the housing market and give hard-hit cities a lift as they begin their post-pandemic recoveries.But the base case next year should be a historically strong first half for the housing market, fueled by crisis-level inventories, low interest rates, a post-vaccine economic boom and a demographic tailwind from family-forming millennial households. This will be welcome news for the economy — unless you're looking to buy.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Conor Sen is a Bloomberg Opinion columnist. He has been a contributor to the Atlantic and Business Insider.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Bitcoin’s true believers are taking a victory lap after the cryptocurrency’s fresh all-time high of almost $20,000. “Onward and upward we go to the moon!” tweeted Tyler Winklevoss. “All governments, [financial services] and corporations will soon be mining Bitcoin to guarantee their own supply,” echoed Bitcoin advocate Charlie Shrem. That appears to be true of the Venezuelan army, at least. But is this new record going to convert an often-skeptical financial sector, at least beyond hedge funds and strategists who see Bitcoin as a Covid-19 safe haven? Not everyone is convinced.Last month, as the cryptocurrency hit $18,000 for the first time since 2018, Jamie Dimon at JPMorgan Chase & Co. said he hadn’t changed his mind since he called Bitcoin a fraud during its 2017 bubble. “We’re a believer in cryptocurrency, properly regulated and properly backed,” he said, adding, “Bitcoin’s kind of different, and that’s not my cup of tea.”Dimon’s stance ultimately reflects the mood inside bulge-bracket banks that have been dipping their toes in crypto waters. Forged during the 2008 financial crisis as an artificially scarce, cryptographically secure way to bypass traditional finance, Bitcoin won’t be viewed as an existential threat to the banking system just because its price is soaring. But it won’t be ignored either. Rather it will be seen as a spur toward a more digital, regulator-friendly post-Covid payments future.We’ve seen big banks seek to make money from Bitcoin without handling it directly, reflecting fairly limited client demand and a lack of regulatory clarity. That’s still the preferred option. Morgan Stanley began clearing cash-settled Bitcoin futures in 2018, while JPMorgan this year adopted crypto exchanges Coinbase Inc. and the Winklevoss twins’ Gemini Trust Co. as corporate-banking clients.Bolder proposals such as Goldman Sachs Group Inc.’s bid to open a crypto trading desk never really got anywhere. The long list of risks highlighted by the Bank for International Settlements, from money laundering and terrorist finance to reputation, might have something to do with it. A survey of financial assets between 2010 and 2019 on the Bank of England’s staff blog found that Bitcoin’s market downside risk was 44%, steeper than stocks or gold.None of this would normally be insurmountable for bankers when there’s real money to be made. But even with serious sums changing hands on crypto exchanges, and funds such as Guggenheim Partners LLC eyeing Bitcoin, the proverbial phone still isn’t ringing off the hook. Even parts of the banking sector willing to go further know they need regulators on board. Singapore’s DBS Group Holdings Ltd. is planning to run its own digital currency exchange for qualified investors, but only once it receives regulatory approval. There’s certainly more oversight in 2020 than there was in 2017: European Union anti-money laundering rules now extend to crypto exchanges, and U.S. regulators allow banks to offer cryptocurrency custodian services. Still, European Central Bank boss Christine Lagarde this week reiterated Bitcoin and its ilk were “highly volatile, illiquid and speculative.”The bigger question for Wall Street banks therefore isn’t Bitcoin itself but what comes next, especially since its clunky flaws as a method of payment are well-known. Central banks and private companies alike are scrambling to hit upon a mass-market alternative that might fix them. That might involve central bank-issued tokens like a digital euro, which is at least five years away, or a privately issued coin like Libra, which may be just one month away. Banks’ business models might be vulnerable.QuicktakeThe Future of Crypto CurrenciesFor JPMorgan, it makes sense to pursue blockchain ideas like JPM Coin that could save money for banks in payments. The advantage isn’t just potential cost savings, but also attracting smart tech talent, as seen by LVMH executive Ian Rogers’s move to crypto hardware startup Ledger.Lenders have no choice if they want to compete with digital rivals out to eat their lunch. Paypal Holdings Inc.’s recent foray into Bitcoin is part of a broader fintech push with apps like Venmo. The firm is also speaking to regulators about digital wallets. In a post-pandemic world of low rates and rising defaults, banks are worried about the tech crowd. After all, in the euro zone non-banks overtook traditional banks’ market share of deposit-taking and lending in 2018, according to the Centre for Economic Policy Research.Crypto may be making a comeback after a long winter, but when it comes to Bitcoin, bankers can afford to hibernate a little longer. Staying one step removed, by offering banking services to money-spinning exchanges or facilitating futures trades, is the equivalent of selling pickaxes and shovels during the gold rush. Dimon’s right to hold back.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. He worked previously at Reuters and Forbes.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.