Thursday, August 10, 2023

“The modern world is a crowd of very rapid racing cars all brought to a standstill and stuck in a block of traffic.” – G. K. Chesterton ||

Hello everyone! It’s HOT where I am, I hope you’re all managing to keep cool…

You’re reading the premium daily version of Crypto is Macro Now. In this newsletter, I give some depth on factors I’m keeping an eye on that highlight the growing overlap between the crypto and macro landscapes – my focus is on how crypto is affecting the global economy, and vice versa. There is often a market discussion as well, because that is an important piece, not just for the structural changes but also for investor sentiment, which impacts attention and funding. Nothing I say is investment advice!

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IN THIS NEWSLETTER

• US inflation – it’s what’s ahead that matters

• The SEC appeals

• Russia to trial its CBDC

• Earnings yields are lower than cash yields

WHAT I’M WATCHING

US inflation – it’s what’s ahead that matters

Today we get the latest US CPI reading, amid signs that inflationary expectations are ticking up.

Some key signs:

One thing I’m especially looking forward to after today is that we hopefully get to stop talking about inflation for at least a couple of weeks – PCE data isn’t out until the end of the month.

There are a few interesting charts I haven’t yet shared, though, that are probably irrelevant for today’s reading but that point to a possible pickup ahead.

One is the “breakeven” inflation rate calculated from the pricing of inflation-linked treasuries, or TIPS (Treasury Inflation Protected Securities). This is often used as a proxy for what the market is expecting for inflation at the end of the bond’s term.

On a 5-year basis, the breakeven rate is currently at 2.23%. That’s great, very close to the Fed’s target of 2%, but look at the 30-day moving average (the orange line). It’s not moving in the right direction.

(chart via TradingView)