On Week 43, the Nasdaq closed in the red, suppressed by expectations of more Fed rate hikes ahead, and faced by a jump in GDP, expanding core PCE, and mixed corporate earnings. Meanwhile, BTC and ETH met strong resistance at $35K and $1.8K, respectively.
On Monday, Chicago Index increased a bit, and Nasdaq rose slightly. This came ahead of a busy week with earnings reports from four big tech companies. Tech and consumer discretionary stocks were the top performers, while energy and materials stocks lagged. Microsoft, Alphabet, Amazon, and Meta all advanced ahead of their earnings reports, while Nvidia jumped after news that Chinese tax authorities are investigating Apple. Meanwhile, BTC continued to rally on expectations of BlackRock’s spot BTC ETF nearing approval, reaching 32K — its highest in five months. On the other side, ETH showed much less price performance, still staying in its October range of 1.65–1.75. Other news: FinCEN proposal seeks to expand the PATRIOT Act to cryptocurrencies.
Details
The economy grew a bit in September 2023, according to the Chicago Fed National Activity Index. This was driven by a rebound in manufacturing activity and a slight improvement in employment.
Comment
First, Boomers tell us that a 20-year-long regime of the “zero” rate is an anomaly, supported by a slow economic growth world-wide, so holding the rate at 5% for an indefinite time is perfectly fine, despite all the stupid complaints from “some” business owners about the recession and rising unemployment.
Second, they will start telling us that having several major wars all over the globe killing tens of thousands of people a day is also the “historical habitability” and that it is not caused by their own stupid policies at all — it is just a “return to a world’s normal state.”
Then we will have to wait just a bit before Boomers will start to preach to us that the nuclear war is absolutely okay because it’s just a continuation of their peaceful policies by other means.
Crypto
The latest FinCEN proposal seeks to expand the PATRIOT Act to cryptocurrencies, meaning that all cryptocurrency privacy tools would be subject to extensive reporting to FinCEN. This would lead to a central database of all users of privacy tools, making it easier for the government to crack down on them in the future.
Comment
Proposition for Comprehensive Political Reforms
In light of the unprecedented expansion of government powers, often attributed to scapegoating and resulting in unwarranted intrusions into our private lives over recent years, it is imperative that we propose comprehensive political reforms. This high-level outline, though lacking many crucial details, aims to provide a stage-by-stage transformation of our intricate and already tumultuous world.
I. Introduction of a New Political Generation
The first step in our reform agenda is to introduce a fresh, younger generation of political candidates at all levels of governance — municipal, state, and federal. Each candidate should establish a financial “snatch fund” as collateral, contingent on their commitment to uphold the decisions made by People’s Decentralized Autonomous Organizations (DAOs), comprised of all voters who elected them.
II. Electoral System Overhaul
To restore public trust in the political process, we propose a complete overhaul of the electoral system. This includes the prohibition of all forms of lobbying and prevents politicians from assuming positions in businesses after leaving office. State pensions will suffice for individuals who pledge to serve the people. Also, limitations on politicians’ age and terms in office must be introduced. Additionally, all elections must be direct, instantaneous, electronic, and blockchain-based, ensuring transparency and scrutiny by all citizens.
III. Transition to Direct Democracy
Our third proposal involves the transition from a representative democracy to a direct one. This transformation begins with the abolition of the presidential office, returning power to individual states and, further, devolving authority to cities and municipal communities. Electronic plebiscites on federal-level issues, including matters of war and economic policy, should become standard. Furthermore, the elimination of most federal agencies is suggested, with their essential functions outsourced to private, competing businesses.
IV. Declaration of Individual Sovereignty
A new constitutional amendment should be enacted, affirming absolute individual sovereignty and the primacy of individual rights over the state. Personal privacy and security must be inviolable.
V. Lowering Regulatory Barriers for Private Businesses
In order to foster innovation and adapt to a divided world, we propose a significant reduction in regulatory requirements for all private businesses.
VI. Implementation of Universal Basic Income (UBI)
We advocate the introduction of UBI, distributed algorithmically and unconditionally to every citizen. The funds for UBI will be generated from a single tax on all business activities. All other taxes (except on wars) must be abolished. Most federal state departments, with the exception of a few critical functions (e.g., defense and environmental protection), should be closed, with their responsibilities transferred to competitive private enterprises. Departments are financed from peoples voluntary donations.
VII. Global Governance Transformation
On the international stage, we envision a new governance system based on individual empowerment over state authority and complete global governance decentralization. Passports should be abolished, and individuals should possess only anonymous coded identifiers, confirming their unique identity without revealing personal information. Citizens of states that infringe upon the rights and liberties of their populace should receive preferential treatment. Borders must be transparent, and new regions should be designated to form new countries when existing ones cannot accommodate them. “Government As A Service” principle must be universal in all free states.
This political reform proposition seeks to address the core issues plaguing our current political systems, promoting transparency, individual sovereignty, and greater control for the people over their governance. While the details may require further refinement, this roadmap offers a direction for transforming our complex and crisis-ridden world
On Tuesday, private sector growth accelerated but the Nasdaq rose, ignoring the perspectives of Fed rate’s new hikes, led by strong corporate earnings reports and a stabilization in Treasury yields. Top gainers included Spotify, Verizon, and Coinbase, which soared by more than 6% as Bitcoin rose to 35K for the first time since April 2022. BTC and ETH relented on technicals after a week’s rally.
Details
Private sector growth accelerated in October 2023, driven by manufacturing and services expansion. Demand for manufactured goods improved, but new service business fell. Job creation was weak, backlogs fell, and expenses and inflation eased. Business confidence picked up.
On Wednesday, new home sales surged, and the Nasdaq hit its lowest levels since June, as investors returned to concerns about interest rate hikes and weighed mixed earnings against rising yields. Alphabet sank 9.5% due to weak cloud revenue, while Microsoft surged 3.1% on strong earnings. Bitcoin remained under USD 35K on lowering volumes, while Ethereum, at under 1.8K, showed a correction pattern on an hourly graph. Other news: A renowned crypto forensics company reported that only USD 21K was raised by Hamas in crypto donations.
Details
New home sales surged in September to their highest level in 20 months, driven by limited existing home supply. Sales increased in all regions and median and average prices rose from a year ago.
Comment
The decoupling of Fed rate hike policies from the market and the broader economic conditions can occur for several reasons. Here’s an explanation of how this might happen:
Market Expectations and Forward Guidance: The Federal Reserve often provides forward guidance about its interest rate policies. If the Fed signals that it intends to raise rates gradually and in response to strong economic fundamentals, the market may already price in these changes. So, as long as the rate hikes align with the expected trajectory, the market may continue to perform well.
Alternative Sources of Financing: One important reason for the decoupling, disregarded by most main-stream analysts, could be the increasing diversity of financing sources. In today’s financial landscape, there are numerous options beyond traditional banks and large investment institutions. For example, companies can raise capital through private equity, venture capital, crowdfunding, or direct lending. Additionally, the proliferation of FinTech platforms and peer-to-peer lending has created alternative channels for borrowing and investing that are less affected by Fed rate policies.
Global Economic Factors: The decoupling can also be influenced by global economic factors. If other major economies are also performing well and have their own independent monetary policies, it can mitigate the impact of Fed rate hikes on global markets.
Market Psychology and Sentiment: Investor sentiment and psychology play a significant role in market behavior. If investors believe that the Fed’s rate hikes are a sign of confidence in the economy and a necessary step to prevent overheating, they may perceive it as a positive signal rather than a negative one.
Investor Adaptation: Market participants may adapt to higher interest rates by shifting their portfolios towards assets that are less sensitive to interest rate changes. For example, they may invest in sectors that tend to perform well during periods of rising rates, such as financials and energy.
Crypto
Crypto forensics company Elliptic has disputed claims about the scale of fundraising by Hamas using digital currencies, stating that while the group solicited bitcoin donations in 2019, it stopped all public-facing crypto fundraising in April due to safety concerns (hilarious!). Elliptic’s blog post reveals that only USD 21K in fresh crypto donations have arrived since recent attacks in Israel on October 7, with most of it already frozen. Elliptic asserts that the amounts raised via crypto donations remain small compared to other funding sources, and no public crypto fundraising campaign by a terrorist group has received significant levels of donations relative to other sources.
On Thursday, the economy grew 4.9% in Q3, and the Nasdaq fell to its lowest level since May as investors focused on higher rates for longer as well as disappointing earnings results. BTC and ETH paused on technicals, still hanging inside the 34–35K and 1.85–1.75K ranges, respectively.
Details
The economy grew at a 4.9% annualized rate in Q3 of 2023 (compare with 2.1% in Q2), the most since late 2021. Consumer spending, exports, and private inventories were the main drivers of growth. Government spending also increased faster than in the previous quarter. However, nonresidential investment contracted for the first time in two years.
Comment
There are a few reasons why the US economy grew so much in the third quarter of 2023 despite a record high Fed rate:
- Consumers started to buy durable goods in expectation that their prices would get higher. This is known as inflation hedging. When consumers expect prices to rise, they tend to buy more goods and services now, rather than later. This can lead to a surge in demand, which can boost economic growth.
- Government spending on wars and socials increased. Government spending can have a significant impact on economic growth. When the government spends more money, it increases the demand for goods and services, which can lead to job creation and economic growth.
- Also a factor that contributed to the strong economic growth in the third quarter was that consumers have been spending heavily on travel, dining out, and other leisure activities during the vacation period, in anticipation of better times ahead. This has boosted the retail and hospitality sectors, which are two of the largest drivers of the economy.
In addition to these factors, the US economy may have also benefited from a strong labor market and a rebound in exports.
On Friday, the Nasdaq showed a bearish doji, as corporate earnings reports were mixed and core PCE rose 0.3%, the most since May. Shares of Amazon and Intel jumped after the companies reported strong earnings. Meanwhile, BTC and ETH continued to linger in their previous ranges below 35K and 1.8K, respectively.
Details
Core PCE prices, the Fed’s preferred measure of inflation, increased by 0.3% in September, the most in four months. The annual rate eased to 3.7%, the lowest since May 2021, but remained above the Fed’s 2% target.
Comment
What is going on in the World in 2020th?
- From a social perspective, the Baby Boomer generation has now reached their seventies, marking a significant turning point as the reins of power and capital begin to shift toward Generation X and the Millennials.
- From an economic perspective, third-world countries have invested in building infrastructure to transition from export/import-oriented economies to those centered around internal consumer markets.
- From a political perspective, the elites of these nations have not only accumulated significant wealth but also garnered governance experience, thereby enabling them to diverge ideologically from their counterparts.
- From a technological perspective, the profound scientific breakthroughs of the 20th century have been successfully integrated into numerous algorithmic and engineering solutions, resulting in a substantial increase in personal productivity.
- From a military perspective, rapid technological advancements over the past two decades have caused formerly dominant armies to lose their key advantages to smaller yet more agile competitors.
- From an ethnic perspective, the rapid development of transportation and the opening of borders have facilitated cultural diffusion, triggering a substantial counter-reaction from the indigenous majority populations.
- From a psychological perspective, living in a time of constant change is unsettling.
On Week 44, investors will be watching the Fed’s interest rate decision, the labor market report, and earnings from major companies. Additionally, GDP growth rates and manufacturing PMIs will be monitored for insights into global economic trends.
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