Jul. 19 Markets Report: Inflation Is Hotter Than Hell

Jul. 19 Markets Report: Inflation Is Hotter Than Hell

Inflation's still way up (and the Fed only has the one idea to fix it), the crypto market value gained back its fourth comma, and Hugh Hefner's legacy is apparently going to live forever in Web3.

Jul. 19 Markets Report: Inflation Is Hotter Than Hell
Darry Port

Updated Jul 19, 2022

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Macro

One Step Closer to NATO 

  • Ukraine has become an associate member of NATO's Multilateral Interoperability Program, which means they’ll participate in and contribute to the development of NATO standards. 
  • Russian troops have now entered Siversk, a city in Ukraine’s Donetsk Oblast. 

US Economics

  • Interest Rates: 1.75%
  • Unemployment Rate: 3.6%
  • GDP YoY: -1.6%
  • CPI YoY: 9.1%

Red Hot Inflation Gets Even Hotter

  • According to CNBC’s All-America Economic Survey, President Joe Biden’s approval numbers are sitting at a dismal 30%, as much as 11% less than the all-time lows of his predecessors Donald Trump (41%) and Barack Obama (37%).
  • On Wednesday, the U.S. Bureau of Labor Statistics reported that the consumer price index (CPI) increased 9.1% from a year ago, the highest level of inflation since November 1981. 
  • The CPI was led by energy and food prices, with energy prices up 7.5% on the month while food prices jumped 1%.

Stocks & Bonds

The Gap Grows Larger

  • Short-term bond yields surged as the latest CPI numbers came in red-hot. The 2-year Treasury yield, in particular, continued to climb above its 10-year counterpart. 
  • The yield curve inversion between the two is currently at its highest level since 2000, with some investors seeing this as a recession indicator. 
  • With inflation showing no signs of slowing down, analysts are now expecting a 75-100 basis point rate hike during the next FOMC meeting from July 26-27.

Bond Yields

  • US2Y: 3.1744%
  • US10Y: 2.984%
  • US30Y: 3.144%

Stock Market Performance

  • Dow: 0.97%
  • S&P: 0.96%
  • Nasdaq: 1.79%

Underestimating the Fed

  • Stocks rose moderately this past week, despite inflation continuing to spiral out of control. Analysts suggest that this mini-rally was owed to the fact that investors don’t believe the Fed is going to aggressively hike rates. Well, that and some better-than-expected earnings from firms like Goldman Sachs. 
  • There’s still a slew of major earnings to be reported this week from giants like Netflix, Johnson & Johnson, Tesla and Verizon.

Prime Day Bonanza

  • Despite soaring inflation, Amazon announced that this year’s Prime Day event was its biggest ever at 300 million items purchased worldwide. 
  • As last week’s rumors suggested, Twitter went ahead and filed a suit against Elon Musk in Delaware Chancery Court after the billionaire announced that he was terminating his $44 billion acquisition of the social media company. 

Sector Performance

  • Energy: -2.20%
  • Materials: -1.06%
  • Consumer Discretionary: 1.77%
  • Information Technology: 1.10% 

Real Estate 

The Jenga Tower is Falling

  • According to the Mortgage Bankers Association, mortgage applications fell 4% for the week and 18% as compared to one year ago. Yet another sign that buyers are pulling back due to record-high prices and rates. As of writing this, the 30-year fixed mortgage rate slid down to 5.72% from 5.84% last week. 
  • Redfin reports that rent increases are also slowing down, with the median national asking rent up 0.7% from May. This is the smallest month-over-month increase since the start of 2022. The one caveat is that rent is still rising in strong job markets like New York and Seattle, as opposed to metro areas like Milwaukee and Minneapolis.

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Crypto

Blue Chip Cryptos

Back Above $1 Trillion

  • Come let us rejoice, my fellow cryptonians. The total crypto market cap is above $1 trillion once more, with Bitcoin (BTC) currently trading at $22k. And while BTC is up by a solid 8% from last week, Ethereum is surging three times as hard – presumably because investors are positioning themselves for ETH’s merge to proof-of-stake (PoS) in September. 
  • In fact, just about every top 100 crypto that isn’t a stablecoin of some sort is in the green this week. One of the most notable gainers this week is Polygon (MATIC), which is pumping on news that the layer-2 blockchain has been invited to the 2022 Disney Accelerator program.

Mashinsky’s Shenanigans 

  • Former unicorn crypto lender Celsius Network has Filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.  According to the documents, Celsius’ balance sheet holds $4.3 billion in assets against $5.5 billion in liabilities. In other words, the company is $1.2 billion in the hole. 
  • Now the company isn’t dying or anything, since it has over $160 million in cash on hand for operations. But at this point in time, it’s not clear whether Celsius will ever be able to fully repay their customers.

Binance Taking a Page from Uber’s Playbook

  • Russian President Vladimir Putin recently signed a national ban on using digital assets for payments.
  • Crypto exchange Binance has been fined 3.3 million euros ($3.4 million) by the Dutch central bank for offering its services in the Netherlands without authorization. 

NFTs & Metaverse

Multi-Million Dollar Digital Antiques

  • The total NFT market cap is up 7.24% this week, valued at $24.55 billion. Trading volume is also up by 10.63% at over $303 million. But that’s nothing compared to this Verified Market Research (VMR) report that predicts that NFTs will balloon to $231 billion market cap by 2030.
  • This week not one, but two CryptoPunks sold for multi-7-figures — indicating that the NFT market could very well be heating up for another bull run. The two CryptoPunks in question are:

Battle of the NFT Marketplaces

  • Leading NFT marketplace OpenSea recently announced plans to lay off around 20% of its staff to weather this crypto winter.
  • After a little over 2 days of being live, GameStop NFT already saw nearly double the all-time trading volume of Coinbase’s NFT marketplace that has been live for months. And while GameStop’s NFT performance still pales in comparison to OpenSea, could it become a legitimate competitor one day?

Playboy Bunnies in the Metaverse

  • On Saturday, Yuga Labs invited four thousand players (Otherdeed owners) and some third-party developers for a first-look at the Otherside tech demo. Amazingly, these Otherdeed owners will be able to contribute to the platform as co-developers.
  • Skateboarding legend Tony Hawk is partnering up with The Sandbox to build the largest virtual skatepark ever made.
  • Lifestyle company Playboy is also going to be launching a digital version of their Playboy mansion in The Sandbox.

Commodities

Cap or No Cap? 

  • This week we saw oil prices drop below $95 for the first time since Russia’s invasion of Ukraine.
  • On Thursday, U.S. Treasury Secretary Janet Yellen said that imposing a cap on Russian oil prices is key to alleviating pain at the pump and combating the inflation caused by sky-high energy prices. But only time will tell if the G-20 countries will heed her words.

Can Germany Weather the Winter?

  • The gas supply crisis is getting so bad in Germany that energy giant Uniper is currently drawing on stored gas that was intended for the coming winter.
  • Not to mention, Uniper is also asking the German government for a bailout since this shortage has put the utility company in a bad financial spot. 

Startups

That PE Money

  • Crunchbase recently took a look at who most active investors are amid this startup funding drought. Surprise, surprise (not really), startup accelerator Y Combinator topped the list at 18 deals made in June 2022  — which is -37% less deals than YC closed around the same time last year. The runner-up is Gaingels (17 deals), a New York-based VC firm that invests in diverse and inclusive leadership teams.
  • This past week, we saw slightly larger funding rounds as private equity (PE) firms entered the mix. The 3 biggest rounds include
    • Monolith, $300M: A greentech company that produces clean hydrogen, carbon black and ammonia through their proprietary process. 
    • Pico, $200M: A software and data provider for the financial services market.
    • SingleStore, $116M: A database provider for operational analytics and cloud-native applications.

Appetite for Construction

  • On Thursday, it was reported that payments giant Stripe slashed its internal valuation by 28%. Since the company was last valued at $95 billion in March 2021, that means the unicorn is now worth around $68.4 billion. That’s quite the haircut. 
  • Crypto VC firm Multicoin Capital, rumored to be the best-performing venture fund of all time at over 114x multiple on invested capital (MOIC), just raised $430 million for Venture Fund III. Sounds like wealthy individuals and institutions are still as hungry as ever for those sweet crypto gains. 

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