Good Thursday AM,

Equities are seeing a small bounce today, which is making improvement in the bond market difficult. Traders are buying the dip as they see these levels as good entry points. I think we have more pain to endure in equities, and bonds should improve further, but we will see. The economic data has certainly been challenged; GDP for Q1 came out worse than the initial reading (-1.5 vs -1.3). I would focus on the data and that is telling me that rates could improve from here. It is never a straight line though.

Bloomberg had a good piece this AM about a moment of truth:

A phrase like “moment of truth” is an overused cliche. But in many respects, it’s an apt way to describe where things stand with respect to inflation.

We should start to see inflation decelerate meaningfully over the summer, and if that doesn’t happen that would be pretty alarming.

For one thing, the Fed has begun its aggressive hiking path. So the monetary part is in place. And as I wrote about earlier in the week, we’re in the throes of a pretty significant fiscal tightening as well.

There’s also been significant normalization and easing in parts of the market that were previously dysfunctional. Trucking rates are coming down. Global shipping rates are coming down. After running extremely lean for along time, the big retailers are now sitting on growing piles of unsold inventory. The long awaited shift from goods to services appears to be happening.

Meanwhile, there are all kinds of signs that economic activity has kicked into a lower gear.

Initial jobless claims have been picking up. New home sales have rolled over sharply. Mortgage applications have tanked. Global ISMs are all showing deceleration. Regional Fed manufacturing reports have declined.

In other words, there are plenty of theoretically disinflationary forces now firmly in place.

So it would be weird and potentially alarming if these forces don’t translate into some kind of progress on price stability over the next several months. We’ll see.

Prior to the pandemic, only one in 10 households moved each year. Yet, in the past two years, 25% of consumers have moved and 24% plan to move in the next year.

Nearly one in nine first-time buyers (11.6%) sold cryptocurrency to help finance a down payment in 2021, up from 8.8% in 2020 and 4.6% in 2019. In 2021, over $31 billion was invested in real estate technology companies. Meta has committed to investing $10 billion per year, for each of the next 10 years, just on the metaverse.

And on that note, where is crypto going?

I still refuse to call it a currency. Attorneys for cryptocurrency-trading platform Coinbase Global filed a motion this month to dismiss a class-action lawsuit arguing that 79 of the tokens listed on the firm’s platform are unregistered securities. The group of Coinbase users is demanding reimbursement for trading fees and market losses and seeking to prevent the assets from continuing to trade on the platform. Outside of enforcement actions, the Securities and Exchange Commission hasn’t indicated which cryptocurrencies it considers to be securities. But federal statutes passed in the 1930s deputize ordinary investors to help the SEC do its job, by giving buyers of unregistered securities the right to sue the seller for their money back. How about them apples? The little Dutch Boy (I know I am dating myself) may not have enough fingers to stop the holes in the dam if this gathers steam. Talk about a moment of truth…

Please remain safe and healthy, make today great.