Connect with us


Inflation Assets Are Leading The Recovery. That’s Not Normal

Inflation Assets Are Leading The Recovery. That’s Not Normal

By Marcel Kasumovich, Head of Research for One River Asset Management




Inflation Assets Are Leading The Recovery. That's Not Normal

By Marcel Kasumovich, Head of Research for One River Asset Management

It’s normal, sort of. Digital asset markets are following a commodity boom, bust, recovery cycle. Investors are focused on the bust. The decline in inflation, bond yields, and the US dollar makes the downturn shallower. And inflation assets are leading the recovery. That’s not normal. 

Inflation Assets Leading the Not-Normal

“If you want two cups of coffee, save money and order both at the same time,” a student at the University of Freiburg famously quipped during Germany’s hyperinflation. That’s the inflation we worry about – pernicious, invisible tax. The recent surge in inflation is an inconvenience by historical standards. Periods of inflation lead people to shed currency for almost any real asset – even pianos were a hedge for Germans in the 1920s. That’s not now. But it’s also not never.

The pandemic brought a warning shot, a reminder that the saying “too much money chasing too few goods” still applies. Global inflation surged to 9% last year as bottlenecks emerged in all supply chains. Assets believed to hedge inflation performed dismally. Real assets – bitcoin, gold, lumber, land – crashed as inflation rose. Those assets didn’t “fail” in their roles. Real interest rates shot higher. And that’s the real driving force behind inflation assets.  

The evidence is obvious in investor behavior. There was a dash for cash as inflation rose, not real assets. Last quarter, Global Fund Managers reported the highest cash holding since 2001! The inflation tax was an afterthought. All other assets were rapidly deflating in response to the surge in rates. That is not an inflationary mindset. It’s conviction that policy will kill inflation, leaving real rates higher for a stretch of time. And it’s self-reinforcing.

Market expectations call for a cratering of inflation this year, to 2.33%. It’s also expected to stay there for a very long time, 2.19% in 2024 and an average of 2.29% in the next ten years. The consensus is centered on the idea that a recession will bring everything back to “normal.” And it is exactly how investors are positioned – long bonds, short equities, and long US dollar (Figure 1). Our own Macro Pulse confirms the consensus – it’s in recessionary territory.

But change is afoot. Downturns don’t last long, even brutal ones. They are usually fast, severe fractures. This one is slow and shallow. Our Macro Pulse has been in recessionary territory three of the past four months; the longest recessionary signal was nine months in the Great Financial Crisis. Market stabilizers are also emerging. Declines in inflation, bond yields and the US dollar are cushioning the downturn with mortgage and business surveys bottoming.  

Commodity markets provide the simplest connection to the cyclicality of digital assets. Doug Wilson, One River Digital PM, likens the downturn in digital infrastructure to a boom, bust, recovery cycle of energy markets. It’s a terrific benchmark. Bitcoin is a unit of energy. The boom saw Bitcoin trade miles above its marginal cost of production. That boom led to excess investment. The bust that followed is like an over-supplied commodity cycle.  

What does the recovery look like? Let’s benchmark the boom-bust-recovery cycle through the macro lens of recessions. Figure 2 shows median oil prices in the past 4 economic cycles. The most interesting observation – oil prices aren’t anywhere close to the downturns of the past. This is the “too few goods” side of the inflation equation. A long period of commodity underinvestment means that inflation assets don’t decline to the same degree in recession.  

It also means inflationary assets can lead in the recovery, counter to the consensus of a return to “normal.” But inflation assets are supposed to lag, not lead. It takes an extended period of strong demand to absorb excess capacity built in this expansion. Those are the assets soonest to bump up against capacity constraints and be demonstrated as short in supply. Cyclical forces are pulling down inflation, structural pressures may be less benign.

Digital asset markets are recoupling to macro forces. Inflation assets are leading this year and digital assets are rising with that tide. The differentiation within the digital ecosystem is telling. Base layers and scaling solutions are leading – Bitcoin and Ethereum are back to pre-FTX levels, Optimism scaling protocol has risen well above pre-FTX highs. DeFi protocols are lagging, most notably MakerDAO, as it wrestles with its strategic future pathway.

Market leadership is in the boring basics. We should pay attention. Bitcoin, Ethereum, Lightning, Optimism – base layers with scaling solutions for usable applications. We know that digital asset valuations are all about network effects. But investing in railways is pointless with no demand to ride them. Tokenization has been wildly successful in bridging traditional and digital worlds. That’s one trajectory of turning the boring into beautiful.

Tyler Durden Sun, 01/22/2023 - 21:30

Read More

Continue Reading


Pro-crypto lawmaker stays interim US House Speaker as frontrunner loses first round of voting

Ohio Representative Jim Jordan, the Republican Party’s nominee for Speaker, won the support of 200 of his colleagues in an Oct. 17 vote — below the 217…



Ohio Representative Jim Jordan, the Republican Party's nominee for Speaker, won the support of 200 of his colleagues in an Oct. 17 vote — below the 217 needed to hold the position.

North Carolina Representative Patrick McHenry, chair of the United States House Financial Services Committee and crypto proponent in Congress, is still temporarily in the third most powerful role in government after one of his Republican colleagues failed to secure enough votes.

In a vote conducted with members of the U.S. House of Representatives on Oct. 17, no candidate for Speaker won a majority of votes needed to secure the position. Ohio Representative Jim Jordan, the Republican Party's nominee for Speaker, obtained 200 votes — short of the 217 needed to win.

All 212 Democratic members of the House voted for Minority Leader Hakeem Jeffries, with other votes by Republican lawmakers going to Representatives Steve Scalise, Kevin McCarthy, Tom Emmer, Tom Cole, Thomas Massie and Mike Garcia, as well as former New York Rep. Lee Zeldin. According to House rules, a Speaker need not be a member of Congress.

Rep. McHenry, who has been serving as interim Speaker since Republican members voted to oust McCarthy on Oct. 4, currently lacks the authority to move legislation forward in the House, with the exception of the Speaker vote. For the first time in U.S. history, half of the legislative branch of the federal government was largely paralyzed, making it impossible to move forward with crypto-related bills.

Rep. Patrick McHenry addressing the U.S. House of Representatives on Oct. 17. Source

Many pro-crypto users on social media have called on lawmakers to make McHenry the next Speaker — an outcome which would also require nearly all Republicans in the House to unite behind one candidate. Behind U.S. President Joe Biden and Vice President Kamala Harris, the Speaker of the House is second in the country's presidential line of succession. However, some experts have reportedly said the line of succession does not apply to an interim Speaker like McHenry.

Related: US government among largest Bitcoin hodlers with over $5B in BTC: Report

At the time of publication, it was unclear when McHenry planned to call for a second vote. Many have criticized Jordan for repeating falsehoods surrounding the results of the 2020 presidential election in favor of former President Donald Trump, but he remains the leading candidate with a Republican majority in the House and Democrats united behind Jeffries.

McHenry led the House Financial Services Committee as lawmakers voted in favor of crypto bills including the Financial Innovation and Technology for the 21st Century Act, the Blockchain Regulatory Certainty Act, the Clarity for Payment Stablecoins Act and the Keep Your Coins Act. The pieces of legislation are expected to head to the House floor for a full vote, but the current situation with the Speaker makes that unlikely in the near future.

Magazine: Opinion: GOP crypto maxis almost as bad as Dems’ ‘anti-crypto army’

Read More

Continue Reading


General Motors loses ground to key electric vehicle rival

A major global automaker knocked GM out of the top 3 U.S. EV car companies last quarter.



General Motors’  (GM) - Get Free Report argues that United Auto Workers (UAW) should end their strike to avoid the risk that competitors outmaneuver it in the electric vehicles market.

Indeed, there's a lot at stake. Electric vehicles are increasingly displacing internal combustion engine (ICE) vehicles, and disrupting General Motors' plans could lead to lost market share, and, possibly, end its dominance as America’s top vehicle manufacturer.

The company is already under pressure from one key rival that overtook it last quarter, pushing it out of the top three U.S. EV car companies.

A logo is displayed on a Chevrolet Bolt EV that sits on the sales lot at Stewart Chevrolet on April 25 in Colma, Calif. (Photo by Justin Sullivan/Getty Images)

Justin Sullivan/Getty Images

The EV market is expanding

Consumers bought over 313,000 EVs in the third quarter, about 7.9% of all vehicles sold, according to Kelley Blue Book. Wall Street analysts expect EVs to account for 40% of passenger cars sold in America by 2030.

Related: Tesla’s EV throne is being chipped away at by this surprising luxury brand

So far, the U.S. EV market is dominated by Tesla  (TSLA) - Get Free Report. However, General Motors pioneered EVs when it launched the EV1 to target environmentally conscious buyers in the 1990s.

The EV1 wasn't a hit, but Tesla's cars have gone mainstream because of the car company's focus on luxury and performance — a strategy that has allowed it to successfully compete in the electric SUV market with its Model X and Model Y and win over buyers in the under-$40,000 family car market with the Model 3.

General Motors, Ford  (F) - Get Free Report, and Stellantis  (STLA) - Get Free Report, which owns Dodge and Chrysler, were surprised by Tesla’s success. As a result, they’ve spent billions playing catch up on projects that are only now bearing fruit.

For example, an electric version of Chevy’s top-selling Silverado pick-up truck is expected to roll off assembly lines soon. The same is true for an electric Chevy Blazer and Equinox. It also has plans to reboot the Chevy Bolt, one of the best-selling EVs of the past few years.

More Business of EVs:

General Motors' efforts can’t happen soon enough. It’s far from the only major automaker knee-deep in designing and launching new EVs. Dozens of new models are expected to launch in the coming year, clearing the way for an extensive reshuffling in market share.

We're already starting to see the impact. Total U.S. EV sales increased by 50% in Q3 from last year, and, of companies with more than 1,500 EVs sold last quarter, eight saw EV sales more than double from one year ago.

As a result, Tesla's market share slipped to 50% from 62%, and GM's market share across Cadillac, GMC, and Chevy EVs dipped to 6.4% from 7.3% last year.

General Motors slows while Hyundai sales surge

The growing availability of Hyundai's new EV lineup may be one reason General Motors lost ground in EVs last quarter.

Hyundai sold 11,665 Ioniq5 EVs last quarter, up 143% from Q3 2022. It also sold over 5,000 of its new Ioniq6 EVs, and nearly 2,900 Kona EVs, up 184% from last year.

Altogether, Hyundai sold 19,630 EVs in Q3, giving it a 6.3% market share, up from below 3% last year. Including its high-end luxury Genesis brand sales, the South Korean car company sold over 1,400 more EVs in the quarter than General Motors, pushing GM to fourth among EV manufacturers in the U.S. last quarter.

Hyundai's rapid rise in the EV market may continue if the auto strike impacts General Motors' EV production, reducing available inventories at dealers. If so, the gap between the two automakers could widen.

Sign up to see what stocks we're buying now (General Motors isn't one of them!)

Read More

Continue Reading


An Award Announcement With a Dash of Market Commentary

With words like "Schneider’s dedication to educating others about stocks is unparalleled," Traders World Fintech Awards honors me in the most amazing way…



With words like "Schneider's dedication to educating others about stocks is unparalleled," Traders World Fintech Awards honors me in the most amazing way possible.

I have always been a teacher, whether in Special Education, or on the floor of the NY Commodities Exchanges as a chartist to my fellow traders, or in the last two decades, with MarketGauge and our clients.

Financial literacy might be one of the most underrepresented curricula in the US, if not the world!

My Economic Modern Family was created to fill the gap between basically no financial literacy taught in schools and beyond, to how folks can learn about stocks and the markets in a fun, tangible, and incredibly accurate way.

In yesterday's Daily, we covered the Family and how there is no better time to look at the charts on a weekly timeframe.

Today, the Family shifted.

  • Small Caps (IWM) and Retail (XRT), a.k.a. Gramps and Granny, woke up while Sister Semiconductors (SMH) fell.
  • Transportation (IYT) tested the top end of the range we discussed, which is between 220–235.
  • For XRT, we can say the range to watch is 57–65.
  • Small Caps or IWM needs to hold 170 and clear overhead resistance at 180.
  • Biotech (IBB) has been stuck in time for the last four weeks. The best range to watch would be 120–125.
  • Prodigal Son Regional Banks (KRE), except for a couple of rallies and sell-offs, sits between 40–45.
  • Bitcoin, a new member of the Family, was featured over the weekend in our Daily. As it holds 28,000, we anticipate it can climb to $31,500.

And let's not forget commodities.

In my recent interview with Kitco, I warned, "Higher bond yields could already be taking their toll on the US economy, and weak economic growth and stubborn inflation continue to create a stagflationary environment, which would be bullish for gold."

In another recent Daily, we discussed DBA, the Agricultural ETF, and DBC, the commodity index ETF.

"Over 21.80, we would begin to think more bullish in agriculturals. DBC on the right, more oil and precious metals focused, also underperforms the SPY. That is surprising and supports a risk-on environment. Through 24.75 that picture changes."

Traders' World also wrote, "Her ability to connect with her students on a personal level, provide ongoing support, and foster a sense of community among her followers is remarkable."

And for that, I THANK YOU, my loyal readers! Because of you and your support, I won this incredible award!

This is for educational purposes only. Trading comes with risk.

If you find it difficult to execute the MarketGauge strategies or want to explore how we can do it for you, please email Ben Scheibe at, our Head of Institutional Sales. Cell 612-518-2482.

For more detailed trading information about our blended models, tools, and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth.

Grow your wealth today and plant your money tree!

"I grew my money tree and so can you!" - Mish Schneider

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Mish and Dale Pinkert discuss the disconnect between news and markets-and how to best invest right now in this video from ForexAnalytix's pre-market show.

In this video from CMC Markets, Mish shares her short-term forecast for USD/JPY and popular commodity instruments ahead of the US PPI announcement and September's Fed meeting minutes, with recent dovish comments from Fed officials suggesting a potential shift in the committee's policies.

Mish joins Business First AM to discuss the market reaction to the war in Gaza in this video.

Mish discusses what's needed for a market bottom on the Financial Sense Newshour podcast with Jim Puplava.

Mish takes over as guest host for David Keller, CMT on the Monday, October 9 edition of StockCharts TV's The Final Bar, where she shares her thoughts in the daily Market Recap during a day of uncertain news.

To quote Al Mendez, "The smartest woman in Business Analysis @marketminute [Mish] impresses Charles with her "deep dive" to interpret the present Market direction." See Mish's appearance on Fox Business' Making Money with Charles Payne here!

Mish covers bonds, small caps, transports and commodities-dues for the next moves in this video from Yahoo! Finance.

In this video from Real Vision, Mish joins Maggie Lake to share what her framework suggests about junk bonds and investment-grade bonds, what she's watching in commodity markets, and how to structure a portfolio to navigate both bull and bear markets.

Mish was interviewed by Kitco News for the article "This Could Be the Last Gasp of the Bond Market Selloff, Which Will be Bullish for Gold Prices", available to read here.

Mish presents a warning in this appearance on BNN Bloomberg's Opening Bell -- before loading up seasonality trades or growth stocks, watch the "inside" sectors of the US economy.

Watch Mish and Nicole Petallides discuss how pros and cons working in tandem, plus why commodities are still a thing, in this video from Schwab.

Coming Up:

October 18: Crypto Town Hall X Spaces

October 19: Live Coaching

October 20: StockCharts TV's Your Daily Five

October 23: BNN Bloomberg

October 27: Live in-studio with Charles Payne, Fox Business

October 29-31: The Money Show

Weekly: Business First AM, CMC Markets

ETF Summary

  • S&P 500 (SPY): 440 resistance, 429 support.
  • Russell 2000 (IWM): 177 resistance, 170 KEY support.
  • Dow (DIA): 344 resistance, 332 support.
  • Nasdaq (QQQ): 368 pivotal.
  • Regional Banks (KRE): 39.80 -42.00 range.
  • Semiconductors (SMH): 150 pivotal.
  • Transportation (IYT): 237 resistance, 225 support.
  • Biotechnology (IBB): 120-125 range.
  • Retail (XRT): 57 key support if can climb over 61, better.

Mish Schneider

Director of Trading Research and Education

Read More

Continue Reading