Thursday, June 6, 2024

cross-border retail CBDC complications, jurisdictional arbitrage, an uneven economy, an unbalanced market, and more

“All centuries are dangerous; it is the business of the future to be dangerous.” –  Alfred North Whitehead ||

Hello everyone! I hope you’re all well! And happy 6/6 – I do love symmetry.

In this edition, I’m cheating a bit since I’m barely at my desk today, and sharing a piece I wrote last weekend. It looks at just how complex the web of decisions behind any CBDC project are, and how – for retail – there’s not any market justification. I also look at jurisdictional arbitrage in crypto development, noisy economic data and signs of an unbalanced market. Today’s is a long one, but since I’m absent for the next few days, I figure it averages out.

A programming note: I’m travelling this week and next (Edinburgh and Warsaw), so publishing will be erratic. For now, it looks like this newsletter will have to skip Friday-Saturday and then Tuesday-Wednesday. I should be able to get something short out on Monday, if airport wifi cooperates.

If you find this newsletter useful, would you mind sharing it with your friends and colleagues? ❤

IN THIS NEWSLETTER:

• An uneven economy

• Nasdaq: unstable progress

• Cross-border retail CBDC complications

• Jurisdictional arbitrage

If you’re not a subscriber to the premium daily, I hope you’ll consider becoming one! You’ll get ~daily insight into the growing overlap between the crypto and macro landscapes, as well as some useful links. And there’s a free trial!

WHAT I’M WATCHING:

An uneven economy

Yesterday’s PMI data has just added to the economic confusion facing the Fed, with the ISM services activity index coming in much stronger than expected (53.8 vs 51.0, with above 50 signalling expansion) and stronger than April’s read (49.4). You may remember the excitement after last month’s first non-manufacturing PMI dip into contraction territory in 16 months? Well, it looks like that was a headfake.

(chart via Bloomberg)

Thirteen sectors reported expansion, with only five (including retail) noting a decline, so this growth is not due to a couple of “outliers”. The S&P services PMI, reported the same day, covers a narrower range of sectors – this came in line with the consensus forecast (54.8), but still notably higher than April’s 51.3.

Some analysts are pointing out that we have a divergent economy, with manufacturing shrinking and services continuing to expand – that conclusion overlooks 1) the diversity of data points, and 2) the volatile nature of short-term reads. Remember that the ISM manufacturing PMI for May showed surprising weakness while the S&P manufacturing PMI showed surprising strength – the real trend is probably somewhere in the middle.

And zooming out and squinting at the services vs manufacturing activity indices, we can see that, even just focusing on the ISM data, manufacturing is trending up while non-manufacturing activity seems sort of stuck in low-level expansion. Neither are signalling recession just yet.