Friday's Markets Update (September 22, 2023)

22 Sep 2023 by rate3

On Friday, the Purchasing Managers Index stalled, indicating slowing business activity. The Nasdaq continued its downward trajectory, with bears attempting to test a critical support zone at 13.2K-13.0K. BTC traded sideways slightly above 26.5K, with players closely following macroeconomic data, anticipating more bearish catalysts. Other news: Coinbase's USD 25 billion or more BTC holdings revealed.

Details

Business activity remained largely unchanged in September for the second month in a row, signaling the weakest economic growth since February. The S&P Global Flash US PMI Composite Output Index edged down to 50.1 in September from 50.2 in August. A reading above 50 indicates economic expansion, while a reading below 50 indicates contraction.

Comment

Companies have enough inventory of raw materials and finished goods, and demand remains low, so they are buying less from suppliers. Instead of buying more inputs, companies are using up their existing inventory, which has led to better supplier performance. At the same time, companies need to hold less inventory of finished goods, so they are reducing their post-production inventories at the second-fastest pace since November 2021. Companies are hiring more people, but the pace of hiring is accelerating. The cost of inputs is increasing rapidly, especially fuel costs, but the price of output is increasing only slightly.

In other words, the economy is slowing down, and companies are adjusting their operations accordingly. They are buying less from suppliers, using up their existing inventory, and reducing their inventories of finished goods. They are also hiring more people, but the pace of hiring is slowing down. The cost of inputs is increasing rapidly, but the price of output is increasing only slightly.

Crypto

Cryptocurrency intelligence firm Arkham Intel has discovered that Coinbase, the leading US-based cryptocurrency exchange, holds $25 billion worth of Bitcoin, or nearly 5% of the total supply. This makes Coinbase one of the largest holders of Bitcoin in the world.

Comment

Despite the mantra of decentralization that we all preach, the tendency is clear: over time, any type of asset—decentralized or not—becomes overconcentrated in the hands of a few. This is likely to continue for many years to come, at least until humanity changes its ways and starts to be driven by reason rather than emotional outbursts or muscle memory.

From this perspective, having a variety of tokens and coins is essential to preventing a monopoly on asset ownership. This thesis certainly clashes with the Austrian School's teachings on the perils of inflation and the need for "hard money." However, the reality is that the economy exists to serve people, not vice versa. In this sense, inflation can be seen as a remedy for human weaknesses of character.

After a week of central bank meetings, on Week 39 investors will turn their attention to macroeconomic data releases in the United States, Europe, and Japan. Key data releases include the PCE Price Index, personal income and spending data, durable goods orders, GDP growth rate, and housing data in the US; inflation rates and business and consumer confidence surveys in Europe; and industrial production, retail sales, and unemployment rate in Japan.