CPI What Does It Really Tell Us?
Bitcoin vs GDP the only way to measure it
Headline CPI rose 0.2% MoM and +2.6% YoY both as expected
The preferred FOMC metric, SuperCore (exHousing, exEnergy) CPI remains well above 3.00 at 4.60. The FOMC prefers this metric because it provides (in their belief) better insights to the labor markets. They believe it also provides a better gauge of inflation forecasting and thus influences their monetary policy:
So to defend the FOMC, they can say that SuperCore is down from 6.8 to 4.6 a nice 32.3% decline and it has flat lined here. In their defense, yes the trend has been lower but its flat lined here. Now the more nuanced part is why has it flat lined? Well maybe we are seeing increased demand from all the weather damage the Southeast has sustained. Maybe its from consistent nominal wage increases and until the labor markets start to record significant slack, this may continue.
As far as the markets reaction, the Nasdaq futures put in a slick and quick up move of about 100 ticks then reversed course and currently the market is sitting almost unchanged to down slightly:
Bond yields in the longer end are rising with bonds +4.6bp and the 10yr +1.4bp the shorter end yields are lower with 2s -5bp:
The US Dollar continues to rally and is now pressing into some major resistance areas from that have held the last 1.5 years:
Gold continues to break down and now has $2500 as the target, the top is being confirmed on the daily, so expect sellers to continue to sell rallies here:
We will get into Bitcoin here in a bit but let’s discuss for a bit why prices remain sticky and the relative potential call for the FOMC to pause, although we do not believe they will, rather we expect some MSM pundits to be confused as to how the FOMC can cut rates with inflation still stubborn.
The bottom line for us is, there is still sufficient capital in the system, not only from all the Covid money, but higher rates themselves have contributed to nearly a Trillion in risk free interest transfer not only from our Govt to the private sector, but vice versa, consumers are also paying higher rates! Also asset prices like equities continue to be priced to the moon with no signs of abating. No doubt money is being extracted and monetized in other places as the Ultra Wealthy take profits and buy other assets, fund other businesses, etc.
We also know the FOMC assets are still well above their preCovid levels and just to give you an idea how much their asset base grew:
In January of 2020 the FOMC assets were $4.2 Trillion, fast forward to today, the asset base is $7.0 Trillion, an increase of $2.8 Trillion or 67%. For us here this is why inflation remains sticky, because this is the levered base source money for it! Yeah we know the FOMC claims they have a 2% inflation mandate, however their base asset growth of their own balance sheet has been double digits annualized for the last 26 years, in fact inflation rate is actually 2.98% annualized and the FOMC inflation of assets is an astounding 10.33%!
So when you are asked by your expert friends at work or at parties, why is inflation sticky, well two things, the real inflation FOMC rate is 3% and they grow their assets by 10% plus supporting the asset inflation which concentrates wealth to the very top. The game isn’t that difficult to understand, once you understand the very player that controls it all!
With that said, lets now focus on Bitcoin, where it seems FOMO is in full effect. Yes we do believe we are still in the early stages of the long game, but that doesn’t change our outlook that these players buying in now, the majority are large big money types and the ETF players themselves are just using retail capital flows and pooling them. Let’s just say the Whales control 82% of the market:
We get it, the demand is there, but ultimately the risk is still there as well. Now where and what price people take profits or sell remains unknown, but one thing is certain Magnelibra still believes that Bitcoin is the ultimate form of “Reserve Money” because it is the definition of absolute scarcity! We know the global central banks tried to use regulatory frameworks to thwart the global acceptance but we know that failed spectacularly and it failed because they underestimated the will of the people! It failed because Bitcoin, “Exist Everywhere and Nowhere!” This is actually the title of a white paper I did on Bitcoin 9 years ago and updated in 2017, it can be found HERE on LinkedIn.
For now I will stick to my proper metric of price discovery for the Bitcoin Network and that is its adoption rate vs total global GDP. I honestly believe this is a proper metric and it is so because it is the simplest form of monetary capture in regards to converting fiat money into Bitcoin. Obviously the goal is to NEVER CONVERT into fiat and one day that may be the case for a large percentage of transactions, however we are not there yet. We are slowly adopting and ultimately Bitcoin will continue to gather steam and its a construct of pure energy and time! Here is our chart updated today and this is where we believe the fiat pricing conversion will ultimately adhere to given the % of global GDP it takes over:
So that is our insight, that is how we see this long game transpiring, how long it takes to hit these percentage milestones is anyone’s guess, however as time goes on, well just like everything else, its GRADUALLY, then ALL OF A SUDDEN!
Ok let’s finish this up with yesterday’s settles, net changes and MEGA8s data:
The hedge this week is the 516C if it trades at 3.00 or better, looser investor and traders can target a lower strike but this is why we present these ideas to you. They made another market cap ATH $18.12Tn:
When we look at this basket on the chart these high flyers have basically stagnated now for the last month, undoubtedly on whales in this sector monetizing some shares!
Ok onto yesterday’s settlements for those keeping track the bond markets continue to struggle as did most markets yesterday:
As far as the 5d and 30d Net Changes its Equities, Bitcoin and US Dollar continuing the strength:
Ok that is it guys, we hope you learned something today, we are so close to 500 subscribers, please continue the support and at the least, share the work so others can learn from what we are doing, from the way we extrapolate the data, from the way we decipher the market and events. We are all in this together! Till next time, cheers!