SVET Markets Weekly Update (November 21, 2022)

20 Nov 2022 by rate3

This week was rich on macro updates but BTC kept steady (alongside with NASDAQ) as most of indicators didn’t come far from forecasts and none of those statistics (on the real estate market, mostly) is viewed by FOMC as important.

Here how it went:

PPI: actual increase is 0.2 percent with 0.3 anticipated by analytics;
Retail Sales: 1.3 percent vs 0.9;
Housing Starts: 1.425M vs 1.41M;
Building Permits: 1.526M vs 1.465M;
Existing Home Sales: 4.43M vs 4.38M.
October’s Producer Price Index (PPI) went up 0.2 percent going to 140.39 from 140.08 registered by BLS in September.

As most analytics anticipated 0.3 it led to NASDAQ higher opening. Then traders sold the news and index dropped a bit. It closed lower reaching 11358. Volatility subsided significantly compare to to previous couple of days. BTC followed that dynamic on the hourly and stand below 16900.

Overall traders look hesitant with technicals indicators fighting fundamentals. Many coins appear oversold on daily graphs but with no impulses coming from macroeconomics data it is not likely that we see a continuation after (if) BTC corrects to 18th.

The coming week is halved by the holiday but it might still bring surprises to BTC traders which working hours extend far and beyond 3 pm ET, Wednesday, November 23 when FOMC Minutes are published at the closure of stocks markets.

October’s Durable Goods Orders (DGO) and New Home Sales reports from the Census Bureau issued, too, at Wednesday are not expected to rattle players nerves as most of the home statistics have been already absorbed into BTC pricing the previous week.

On the new orders side we saw an increase of 0.4 percent (monthly) in September (compare to 0.2 in August). Transportation equipment (up 5 of the last 6 months) drove the latest increase (2.1 percent to $95.4 billion), according to Census Bureau. Forecasters expect slower increase (0.3 percent) in October.

New orders were up more than two years since April 2020 after it experience a vertical drop in March. It climbed to its previous historic top in Dec 2007 (this record did stand until 2013) at the same time when the New Home Sales reached its absolute pick (~1.39 million unites sold monthly) on the height of the 2006–2008 home mortgages craze.

After hitting the bottom at 264K in Feb 2011 new homes market continued to rise the next decade reaching 1 million (units sold per month) in August 2020. In September this indicator stood on 603K — off 10.9 percent from 603K reached in August.

New houses market, which dropped 40 percent from its 2021 levels, remains one of the most affected by Powell’s misguided monetary policy. For comparison, NASDAQ Composite went down from ~16K to ~12K or ~30 percent during the same period. People can not afford a better life in new homes as mortgage rate continues to reach now record highs.

On its 50-years graph 30-years rate breached through its 6 percent resistance level in September 2020. Previously, it had served as the floor-rate for generations (since 1972) until it was smashed down in mid-2002. It signals the start of the world-wide corporate expansion epoch. Also it was the beginning of two decades during which the rate gradually diminished from 6 percent at the twenty first century dawn to 2.6 percent in Dec 2020.

Powell’s psychotic anti-inflationary policy led to the rate jumping for more than 300 percent in 10 months. That has never happened before in the rate history. The closest analogue is the rate hike in 70th under ‘the Crazy Paul’ as a FED chairman, when it went from 7 to 18 percent during a decade.

Obviously, aging Boomers start to loosen their grip on reality and start to see the world as a slot machine, which lever they manipulate with increasing speed and frequency causing coins flow like a river into their pockets. If we do not stop them — they go crazy and spin our globe off its axis.

Economically speaking, banks can lend money to whoever they want and at the whatever price they want. The reason banks do not do that is the money market. Banks supply of money is limited by other banks demand for money. Banks must fight each other for consumers funds. The one with a better rate wins. That is how the classical economic mechanism function.

However, the reality is that there are various ways for some market participants, which have plenty of political power and capital, to use system’s irregularities (f.e. an unequal distribution of resources, a control over money flow channels or an information inequality) to their advantage. That prevents markets from reaching an equilibrium and leads states’ economies from one recession to another through short exuberance periods.

To break that vicious cycle governments decided to delegate their monopoly on violence to several private banks. FED was born. However, after more than a century of FOMC playing with rate, recessions keep coming. Today we might be facing the mother of all them.

FED gives us the illusion of control in exchange for our freedom. New technologies allow non-regulated markets to do their job — to match supply and demand sides fast and efficient. DeFi must replace FED and give us back our freedom.