Lifestyle token sales, or a sign tightening is near?

Gazillionaire profit taking.

Recent Gazillionaire share sales whilst not so big in net worth terms, have been in the news of late.

According to Forbes, between March and now, the wealth of global billionaires increased by $5 trillion.

The rich are richer, predominantly from COVID.

Forbes also reported that over the past 6 months around 20 U.S. billionaires had sold a combined $8.7 billion worth of stock. Three had sold more than $1 billion each.

If you look at those sales in isolation and as a percentage of Gazillionaire total wealth it’s not huge, and at these all time highs (barring Tesla) founders probably feel their stocks are fully valued or are on auto-pilot, but is there something else in it?

Might this be a sign of something else?

If you look at a few other factors, maybe these sell downs are more telling:

  • On Thursday, U.S. April CPI printed 0.9% for the month and 4.2% for the year, and 5 year US breakeven inflation hit 2.72%, the highest since well before the GFC - bond yields increased

  • Commodities inflation continues unabated due to still broken supply chains and under-supply, with higher input costs adding to consumer inflation

  • Still no wage growth almost anywhere

  • No wage growth with increasing inflationary expectations means debt (yet again) will be needed to fill the gap

  • Add to that Secretary Yellen’s recent suggestion that the Fed might need to lift interest rates

And despite Jerome Powell’s continual reassurance that this inflation is transitory, the secondary markets are factoring in an earlier than expected monetary tightening from the Fed (rightly or wrongly) and sending the Fed a clear message.

Now what?

It’s always good to look at several data points, not just one.

Keeping an eye on the pace (and size as a % of net worth) of Gazillionaire selling is just one.

If it accelerates to gargantuan proportions over the coming weeks, then it might be a signal they see their stock as overbought, ahead of a correction. We’re not seeing this just yet and probably won’t.

But of all the possible signs and portents, there’s one big one.

If the Fed lets it slip that it’s thinking about thinking about tapering or running off the balance sheet and then recalibrating interest rates, that might be a better signal to get a bit more serious about blowing off some of the froth, and taking some profits ahead of the next rotation.

For corporates, it means thinking about the sorts of cyclical things that one does at the beginning of an up cycle for inflation/interest rates and a down cycle for liquidity/capital raising.

As mentioned above, we’re not there yet and the jury is still out on transitory versus secular inflation, but having a Plan B should always be an essential part of your corporate strategy.

Happy trails.

Mike.

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Michael Ganon#markets, #equities, #bonds, #gold, #globalmarkets, #globaleconomy, #qe, #qeinfinity, #economy, #finance, #interestrates, #business, #trade, #tradewars, #transformation, #strategy, #ceos, #directors, #founders, #csos, #cfos, #c-suite, #currencies, #construction, #mining, #renewables, #technology, #leadership, #india, #china, #australia, #perthbusiness, #education, #research, #uk, #gdpgrowth, #retail, #businessowners, #future, #brexit, #nextlevelcorporate, #mikeganon, #community, #tradewar, #America, #covid-19, #bitcoin, # perthbusiness, #populism