Wednesday's Markets Update (August 16, 2023)

17 Aug 2023 by rate3

On Wednesday, US Treasuries rose to their highest level in 15 years, and the Nasdaq tumbled following the release of the FOMC minutes, forming a bearish pattern on daily charts. BTC fell below 29K, confirming a downside trend. Other news: Uzbekistan created some limited opportunities for cryptocurrency businesses. Singaporean exports and imports dropped by approximately 20% due to the weak global tech sector.

Details

The US 10-year Treasury yield rose to its highest level since 2007 in August, as investors worried about the Fed's plans to raise interest rates and concerns about inflation persisted. The minutes from the FOMC's latest meeting showed that most officials agreed on a 25bps rate hike, but some expressed caution about overtightening. Strong industrial growth data and remarks from Minneapolis Fed President Kashkari also pressured bonds.

Comment

It appears that market sentiment has pivoted from "The Fed is done" to "More hikes ahead." Strong economic data suggest that there is plenty of room for Powell to continue pressuring corporations into submission, and for them to start laying off employees en masse, which the Fed expects will stop service-side inflation. In that situation, many traders might decide to revert their positions and take a bear market stance for at least the next six months or so, until unemployment starts to rise to levels that might be worrisome to the Fed. However, those levels are not known.

Crypto

Uzbekistan approves a local bank to participate in national crypto card project. This bank will be a subject to the Special Regulatory Sandbox Regime. This allows the bank to offer special services in the Uzbekistan crypto space, including the development and implementation of a virtual bank card products. The Special Regulatory Sandbox Regime was created by the Ministry of Justice on December 30, 2022, and it provides a framework for entities in the Uzbekistan crypto space to test new products and services in a controlled environment.

Comment

The United States is losing its pace of innovation to other countries, even to those that have never been technologically prominent. In 2022, the United States ranked 6th in the Global Innovation Index, behind Switzerland, Sweden, the Netherlands, Singapore, and Finland. This is a significant decline from its ranking of 1st in 2011.

There are a number of factors that have contributed to this decline, including:

The increasing cost of research and development (R&D).
The declining number of STEM graduates in the United States.
The rise of protectionism and nationalism, which have made it more difficult for American businesses to innovate and compete globally. The lack of political support for innovation.
The recent incarnation of politicians in the United States have been particularly hostile to innovation. They have cut funding for R&D, drastically reduced immigration of "best and brightest" into USA, and imposed tariffs on imported goods. These actions have made it more difficult for American businesses to innovate and compete.

The only hope for the United States to regain its position as a leader in innovation is to get rid of these politicians and elect leaders who are committed to supporting innovation. We need to invest in R&D, make it easier for businesses to innovate, and create a more open and welcoming environment for entrepreneurs.

Here are some additional statistical data that support the decline of innovation in the United States:

The number of patent applications filed by US residents has declined by 20% since 2011.
The number of venture capital investments in the United States has declined by 40% since 2015.
The number of STEM jobs in the United States has declined by 10% since 2010.
These data show that the United States is facing a serious challenge in terms of innovation. If we do not take action to address this challenge, we will continue to lose our competitive edge to other countries.
Macroeconomics

Singapore's non-oil domestic exports (NODX) fell by 20.2% year-on-year (yoy) in July 2023, worse than expected. This was the 10th straight month of contraction and the steepest drop since January. The decline was driven by faster falls in sales of both electronic and non-electronic products. Shipments of electronic products shrank by 26.1% yoy, while those of non-electronic products fell by 18.5%. Sales fell to most of Singapore's major markets, except the US.

Comment

This 20% decline corresponds to a 10-20% layoff rate in major tech companies in the Valley. These layoffs are likely due to the policies of baby boomer politicians, who are more focused on their own safety and geopolitical dominance than on innovation.

In return for these policies, we have gotten nothing: no security, no stability, no dominance, and no economic growth. The only way forward is to get rid of baby boomer politicians and elect a new generation of leaders who are focused on our individual prosperity and constant innovations - the only way to face growing economic, social and geopolitical challenges.

Javier Milei, a new politician in Argentina, is an example of this new breed of leader. He is not afraid to challenge the bureaucracy and lay off government employees, even if it means making unpopular decisions. Milei's policies are focused on reducing taxes, cutting regulations, and promoting free markets. He believes that these policies will create a more prosperous and innovative economy.

It is time for the world to follow Argentina's lead and elect a new generation of leaders who are focused on innovation and economic growth. We cannot afford to continue with the failed policies of the baby boomers.

Here are some additional statistical data to digest:

The global tech industry is worth $3.2 trillion.
The tech industry employs over 200 million people worldwide.
The tech industry is growing at an annual rate of 10%.
The tech industry is responsible for more than half of all economic growth in the United States.