The Fed Looks Silly And Bitcoin Takes A Breather
This week was full of CPI and PPI numbers, as well as the FOMC. Our pre-recession set-up is firing on all cylinders.
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Topics this week:
Macro discussion
Bitcoin price update
CPI and FOMC debrief
Yields Dive, Stocks Rip: Market Doesn’t Believe the Fed
Stocks are hitting ATHs, right in-line with our pre-recession calls. The 18-months prior to recession, stocks and bonds rally. Bitcoin has not been through a major recession — the COVID recession was abnormal and brief — , but I agree with the likes of Paul Tudor Jones, who calls bitcoin a safe haven asset. This was lent additional evidence in March’s banking crisis when bitcoin rallied 40%.
As a reminder, a summary of the pre-recession trade is as follows: We are in a credit-based system, and as we approach recession and more people feel the pain, money will flow out of economic activity like starting a new business or expanding an existing business and instead head toward safe haven assets. Credit creation slows and money becomes tight. Blue chip stocks are safer than starting a new business, so stocks rally on the way into recession. Bond yields will fall as demand rises, oil and commodities should also fall due to softening demand, and bitcoin should rise as the ultimate safe haven asset. Note: no consideration should be given to Fed policy or M2. They are noise.
Unlike nearly every other macro analyst, I think the stock market rally was obvious for the above reasons. I’ve been talking about it since last year, at least since September 27, on this newsletter during the down slope at the end of Q3.
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