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Russia Bond Default, Crypto Fund Blow-Up No Concern to Markets (Yet)

Last updated on October 19, 2022

The following is an amended form of the Daily Contrarian briefing from June 27. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

Over the weekend we received a couple of troublesome headlines about a Russian bond default and potentially the blow-up of a crypto hedge fund

Markets appear to have shrugged this off, moving higher in the pre-market. While this bounce faded at the open, major indexes are only down a few basis points at the time of this writing (0940 EDT on Monday). Cryptos are down a bit, with bitcoin dropping by about 2% to dip below $21,000.

Audio of today’s podcast

The defaults mentioned at the outset may yet be able to unwind without any systemic risk. Investors have known about Russia defaulting for some time and the crypto hedge fund is relatively small at ~$600 million. But if there are many more such events, somebody is going to be left holding the bag. This would typically be the type of thing investors can point to as the proverbial ‘canary in the coal mine.’

Except investors appear to have decided that it’s time for risk-on. That was the story of last week at least and so far in the early going today it appears to be the story now as well. Is it too early to be piling into risk assets? Or is this an opportune time to snap up bargains, as Oaktree Capital’s Howard Marks said?

Whatever your views on this, remember to do your own research and make your own decisions.

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