The Wolf Den #745 - The Most Anticipated Recession Ever
Will it ever come?
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In This Issue:
The Most Anticipated Recession Ever
Crypto Town Hall Is Underway!
Bitcoin Thoughts And Analysis
Legacy Markets
The China Narrative Intensifies
Binance Is Working On ‘Talent Density’
The IRS Is All-Knowing
Senator Warren Is A Lunatic
From CFPB to Crypto: Kathy Kraninger's Mission to Revolutionize & Cleanse the Crypto Industry
The Most Anticipated Recession Ever
As we approach mid-year, one might feel that something seems off. Weren't we meant to be bracing for a recession? Do you recall the buzz in the news predicting a looming recession, often citing renowned economists for validation? Yet, this narrative seems to have fizzled out.
Let's revisit some of the bold assertions made:
“It would surely be the most-anticipated recession in US history.” - Bloomberg
“Survey after survey shows fears of recession are high. It's easy to see why.” - NPR
“We believe a recession is likely in the U.S. in 2023. A recession has been our base case since mid-June 2022, and our conviction has hardened in the months since.” - Forbes
“With a deep red signal emanating from the ClearBridge Recession Risk Dashboard and a Fed clearly willing to tolerate economic pain in order to restore price stability, we believe a recession is likely in 2023.” - Clearbridge Investments
We often strive to predict recessions, but they are inherently unpredictable, often striking when least expected. Save for a handful of prescient analysts, the COVID-19 recession, the Great Recession, or the early 2000s recession caught most investors by surprise.
As a contrarian, I propose the following: anticipation equates to mitigation. Digging into crowd psychology, if the consensus believes in a forthcoming recession, wouldn't it be more surprising to those on the sidelines or shorting the market if it doesn't occur? We know the inverse holds true during market booms, reflecting the cyclical nature of markets.
Consider the discourse surrounding recessions. There is no established time frame dictating a recession must follow interest rate hikes after a set period. The effects of these hikes can take months or years to permeate the economy. Similarly, a yield curve inversion doesn't necessarily precipitate a recession. Take, for example, the 1995 yield curve inversion, which led to an extended phase of economic growth. A surefire recession checklist simply doesn't exist.
The concept of a clear-cut recession definition is another myth. The official definition, as vague as it might seem, is left intentionally open-ended for interpretation:
The National Bureau of Economic Research’s Business Cycle Dating Committee defines a recession as - “a significant decline in economic activity that is spread across the economy and that lasts more than a few months. The variables the committee typically tracks include real personal income minus government transfers, employment, various forms of real consumer spending, and industrial production.”
If Janet Yellen and Jerome Powell decide there will be a recession, we will have one. Conversely, if they don't, we won't. If public anticipation of a recession is high, this might be enough to prevent its occurrence. Likewise, should we overlook the possibility, our complacency might prompt a recession. Contrary to what experts may claim, a recession largely hinges on the interplay between public economic perception, market behavior, and policymakers' sentiments.
Let's not share this with our leaders - they might not be too pleased.
This poses the question: Does our anticipation of a recession serve as a self-fulfilling or self-defeating prophecy? Do our expectations create a recession, or do they diminish the odds of one occurring? As a contrarian, I believe a recession is more likely when it isn't the talk of the town. However, signs of systemic fragility are essential; the probability of a recession doesn't increase just because we've stopped discussing it. Contrarianism for its own sake isn't sufficient; we need evidence.
I'm personally keeping tabs on rate hikes, yield curves, inflation data, potential bank failures, and the political landscape to gauge the likelihood of a recession. Still, I remain committed to my cryptocurrency thesis and seize opportunities to buy the dips. If crypto is here for the long haul, a recession would be a mere hiccup. My primary focus is earning fiat and bolstering my crypto position. Frankly, discussions of a 'recession' are largely a diversion from the core issue: finding alternatives to a faltering fiat system.
Crypto Town Hall Is Underway!
Crypto Town Hall launched yesterday with a bang, with hundreds of thousands of people tuning in before the space crashed. Classic. I truly believe that this has the potential to surpass major media outlets… and we are just getting started - we can’t be silenced. Click HERE to tune into today’s Space.
Bitcoin Thoughts And Analysis
Absolutely nothing new to see here today, as Bitcoin continues to chop sideways.
Legacy Markets
European stocks rose, ending three days of losses, with US futures also edging higher. This came after the US House passed a deal to prevent a US default and Federal Reserve officials hinted at a pause in interest-rate hikes. Banks and automakers led the gains in the Stoxx Europe 600 index as data revealed that inflation in the Eurozone had slowed more than expected in May. Adnoc Logistics & Services, the maritime logistics unit of Abu Dhabi’s main energy company, experienced a significant surge on its debut after a highly oversubscribed IPO.
Asian markets also advanced, driven by positive economic data from China. The US debt-ceiling deal, now headed to the Senate before the June 5 default deadline, and comments from Fed officials supporting a possible hold on rates, added to the market optimism.
The Euro regained its position against the dollar following the inflation data. Although this might not halt the European Central Bank from raising rates, it has stated it won't consider reducing borrowing costs until core consumer-price growth slows steadily.
Despite a 0.6% loss for the S&P 500 benchmark on Wednesday, S&P 500 futures made modest gains. Nasdaq 100 futures remained steady after Wednesday's 0.7% drop. Tech stocks benefiting from AI saw their rapid rally pause.
On Wednesday, a jobs report revealed over 10 million job openings in April, which was the highest in three months and above consensus estimates, slightly dialing back hopes for a Fed pause. However, Fed Governor Philip Jefferson indicated the central bank might maintain interest rates in June to assess the economic outlook.
In Asia, Chinese stocks' gains dwindled as investors analyzed mixed data on the country's manufacturing activity. However, expectations are set for a solid recovery in the economy during the second half of the year. Lastly, West Texas Intermediate and Brent crude futures stabilized after two days of decline.
Key events this week:
US construction spending, initial jobless claims, ISM Manufacturing, Thursday
ECB President Christine Lagarde speaks at conference, Thursday
Fed’s Patrick Harker speaks at webinar, Thursday
US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.8% as of 10:16 a.m. London time
S&P 500 futures rose 0.2%
Nasdaq 100 futures were unchanged
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.3%
The MSCI Emerging Markets Index was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0690
The Japanese yen fell 0.4% to 139.86 per dollar
The offshore yuan fell 0.1% to 7.1281 per dollar
The British pound was little changed at $1.2431
Cryptocurrencies
Bitcoin fell 0.7% to $26,929.06
Ether fell 0.2% to $1,861.61
Bonds
The yield on 10-year Treasuries advanced three basis points to 3.68%
Germany’s 10-year yield advanced two basis points to 2.30%
Britain’s 10-year yield was little changed at 4.19%
Commodities
Brent crude rose 0.3% to $72.83 a barrel
Spot gold fell 0.3% to $1,957.06 an ounce
The China Narrative Intensifies
Brian Armstrong has asserted that he will not let SEC interference impede his vision for cryptocurrency in the U.S. In a recent op-ed for MarketWatch, Armstrong cautioned that U.S. efforts to push crypto competition offshore would inadvertently benefit China. This perspective paints a new picture wherein the most detrimental outcome would be the U.S. intensifying its crackdown on crypto due to China's growing acceptance of it. The truth is, pivotal decisions will hinge on our elected representatives. Therefore, the forthcoming election will play a pivotal role in shaping the crypto landscape.
“The U.S. and other democratic nations are up against digital systems promoted by an ambitious adversary, China. With the recent launch of its digital yuan, China aims to directly challenge the U.S. dollar and its role in global commerce. It’s not only China that can see the possibilities. Crypto, like the internet before it, has the potential to modernize finance. It's important for American technology leadership and national security that this industry be built (at least in part) in America. If we fall short today, the next generation of Americans will pay the price.” - Brian Armstrong
Binance Is Working On ‘Talent Density’
Independent cryptocurrency journalist Colin Wu has revealed reports of Binance preparing for a significant reduction in staff, which could impact around 20% of its 8,000-strong workforce. Reacting to this news, Binance stated the decision was taken to "focus on talent density across its organization" and clarified that this move was "not a case of rightsizing, but rather, reevaluating whether we have the right talent and expertise in critical roles.” Despite this, Binance continues to advertise for over 700 roles on LinkedIn and more than 300 positions on its website. It's worth remembering that in January 2022, Binance more than doubled its headcount to match the market pace. This recent development appears to be more of a recalibration than a significant cutback.
The IRS Is All-Knowing
A federal court has ruled that the Internal Revenue Service (IRS) has the authority to access user data from Coinbase, implying that data from other centralized exchanges should also be accessible in theory. The method used by agencies to compel third parties to relinquish information in an effort to combat tax evasion is known as a John Doe Summons. Initially, Coinbase resisted these requests, but following the court decision, it no longer has a choice. It's important to note that if you intend to bypass tax laws, cryptocurrency is not the avenue for you. The IRS will go to great lengths to collect its due.
Senator Warren Is A Lunatic
Every morning, it seems as though Elizabeth Warren consults her anti-crypto magic 8-ball, gives it a good shake, and then relays its prophecy to Congress. On a more serious note, Senator Warren bases her crypto 'fact' on research from Elliptic, which states that “over 90 Chinese businesses offering fentanyl precursors accept crypto payments.” It's a broad generalization that seems to have been made with the intent of scapegoating cryptocurrency. She's going to need a stronger argument than this!
She is smoking crack, seriously. We all know that no currency has been used more in illicit transactions than the US dollar.
From CFPB to Crypto: Kathy Kraninger's Mission to Revolutionize & Cleanse the Crypto Industry
Join Scott Melker as he sits down with Kathy Kraninger, former Director of the Consumer Financial Protection Bureau, now turned cryptocurrency advocate, in a thought-provoking discussion about the evolving digital currency landscape. In this episode, Kraninger unveils her plans to help clean up the crypto industry, sharing insights from her extensive career in financial policy. Tune in to uncover the future of crypto regulation, the intriguing intersection between crypto enterprises and banks, and Kraninger's personal mission to drive responsible innovation in this rapidly expanding financial frontier.
In this episode with Kathy, we discussed:
Kathy Kraninger's story
Framework for crypto
Crypto companies and banks
Coinbase case
Regime change
Solidus Labs
Crypto exodus
If Kathy Kraninger was SEC chairman
Can this industry be cleaned?
Passion
Follow Kathy
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
I’m really excited about this spaces. Newbies need a place to ask questions. Thanks