“The percentage you’re paying is too high priced – While you’re living beyond all your means – And the man in the suit has just bought a new car – From the profit he’s made on your dreams.” — Steve Winwood

1. Biggest Bitcoin Fund Sinks Near 30% Discount in Crypto Rout — the $27 billion fund (ticker GBTC) has plunged nearly 17% so far in 2022, outpacing Bitcoin’s nearly 9% decline. As a result, GBTC’s price closed 26.5% below the value of the Bitcoin it holds on Tuesday, widening GBTC’s so-called discount to record levels, according to Bloomberg data. It’s a dynamic that’s plagued GBTC for months. The trust doesn’t allow for share redemptions in the same manner as an exchange-traded fund, meaning that the supply of shares can’t be created and destroyed with shifting demand. As a result, the shares tumbled deeply as investors pulled sharply back from cryptocurrencies, exacerbating the discount in the share price.
2. Nasdaq Entered Correction Territory — the Nasdaq finished the week 12.7% below its all-time closing high, set in November. A decline of greater than 10% is considered a correction for a stock index. Investors have stepped up bets that the Federal Reserve and other major central banks will tighten monetary policy in the coming months, withdrawing a pillar of support for markets. Mounting expectations of interest-rate rises follow evidence that the drivers of inflation have broadened beyond the supply-chain shock that fueled price gains for much of 2021. That has led to big swings, leaving many stocks in a bear market and stoking giant rotations among different sectors.
3. U.S. Existing-Home Sales Reached a 15-Year High of 6.1 Million Last Year — U.S. home sales surged to a 15-year high in 2021, powered by low borrowing rates and an intense buyer demand that are expected to keep the market hot during the first months of 2022. Existing-home sales rose 8.5% from a year earlier to 6.12 million, the National Association of Realtors said Thursday. Home prices grew at a record pace across the country last year. Low mortgage rates in 2021 increased housing demand from all types of buyers, including first-time homeowners, luxury vacation-home buyers and investors. Many households saved more money during the pandemic and benefited from a rising stock market. Employees who could work remotely were willing to live farther from their offices. A large generation of millennials is entering their early and mid-30s, which are common home-buying years.
4. Crypto Crash Erases More Than $1 Trillion in Market Value — Bitcoin, the largest digital asset, lost as much as 8.7% Friday and dropped below $38,000 to its lowest level in six months. Since its peak in November, it has lost 40% of its value. Other digital currencies have suffered just as much, if not more, with Ether and meme coins mired in similar drawdowns. Bitcoin’s decline since that November high has wiped out more than $570 billion in market value, and roughly $1.17 trillion has been lost from the aggregate crypto market. While there have been much larger percentage drawdowns for both Bitcoin and the aggregate market, this marks the second-largest ever decline in dollar terms for both, according to Bespoke Investment Group.

The week ahead — Economic data from Econoday.com:

“Stocks take the stairs up and the Elevator down!!” — unknown

1. China Covid-19 Lockdowns Hit Factories, Ports in Latest Knock to Supply Chains — with Covid-19 flaring up across China, major manufacturers are shutting factories, ports are clogging up and workers are in short supply as officials impose city lockdowns and mass testing on a scale unseen in nearly two years. The prospect of continued disruptions in the world’s second-largest economy, which has a zero-tolerance strategy for combating the pandemic, is heightening fears that the disruptions will ripple through the global economy. Already, companies including memory-chip maker Samsung Electronics Co., German auto maker Volkswagen AG and a textiles company that supplies Nike Inc. and Adidas AG are suffering production hitches.
2. U.S. Inflation Hits 39-Year High of 7%, Sets Stage for Fed Hike — the consumer price index climbed 7% in 2021, the largest 12-month gain since June 1982, according to Labor Department data released Wednesday. The widely followed inflation gauge rose 0.5% from November, exceeding forecasts. Excluding the volatile food and energy components, so-called core prices accelerated from a month earlier, rising by a larger-than-forecast 0.6%. The measure jumped 5.5% from a year earlier, the biggest advance since 1991.
The increase in the CPI was led by higher prices for shelter and used vehicles. Food costs also contributed. Energy prices, which were a key driver of inflation through most of 2021, fell last month.
3. Supreme Court Halts Biden’s Vaccine Mandate for Businesses — The U.S. Supreme Court on Thursday blocked the federal government from enforcing a vaccine-or-testing rule for large private employers but let stand a vaccine mandate for most healthcare workers. The 6-3 decision in the case regarding businesses dealt a setback to the Biden administration’s efforts to curb the spread of the coronavirus amid a record surge in infections and hospitalizations and as the economy returns to more normal conditions.
The ruling does not prevent private employers, states or colleges and universities from instituting their own mandates. The Court allowed New York and Maine to require their healthcare workers to be vaccinated and has upheld college vaccination requirements. And Citigroup is one big employer that has told its U.S. workers they will lose their jobs if they don’t get the vaccine, unless they get an exemption.

The week ahead — Economic data from Econoday.com:

HAPPY NEW YEAR!!!
“The key turning point in my investment management career came when I concluded that because the notion of market efficiency has relevance, I should limit my efforts to relatively inefficient markets where hard work and skill would pay off best.” ― Howard Marks