Welcome to your August issue of the Global Intelligence Wire.
This is the monthly digest exclusively for Global Intelligence Lifetime Circle members, in which I cut through the media chatter and highlight five underreported news stories from recent weeks.
Before we dive into our stories for this month, I want to discuss our Global Intelligence Mastermind #002 online event.
This online summit is scheduled to take place on Saturday, August 27, at 11 a.m., EST and it’s exclusively for Global Intelligence Lifetime Circle members like you.
The lineup for the event is set to include international real estate expert Ronan McMahon, ecommerce entrepreneur Ian Bond, and global markets analyst Kim Iskyan, among others. And we’ll be discussing the major changes that are coming to the economy and our biggest opportunities to profit from them.
I’ll be sharing further details about the event in the coming days, including how to access the event website and ask questions for the Q&A, so check your email for those. I sincerely hope to see you at Mastermind #002.
That said, let’s get to our first story this month… Ethereum prices seem set to jump higher.
Ethereum Prices Look Set to Surge
Ethereum, the Robin to bitcoin’s Batman, is set to go through something called the “Merge” next month. This is a long-anticipated technological update that will see the world’s #2 crypto transition from a proof-of-work system, PoW, to proof-of-stake, PoS, as part of the Ethereum 2.0 project.
I won’t dive too deep into the technicalities here, but PoW and PoS are different approaches for validating blockchain transactions. In time, the move to PoS will see Ethereum’s transaction speed leap to 100,000 per second from about 15 to 17 today, and it is expected to reduce Ethereum transaction costs to fractions of a penny from tens or even hundreds of dollars at present.
The move is widely expected to supercharge the development of the metaverse, among other benefits. But it’s also expected to see ETH’s price surge, possibly to $5,000 or more, analysts say.
It’s believed that the Merge will reduce the amount of ETH in circulation because all transactions will require the spending of ETH, and that ETH is then “burned” or completely removed from circulation. As such, Ethereum will become a deflationary cryptocurrency as more ETH is burned each year than is created.
Ethereum has already started marching higher. Since bottoming in June near $1,050, ETH is up more than 80% to $1,900. With the implementation of the Merge, that trend seems set to accelerate.
Next, a bit more on crypto…
Bitcoin Is Poised to Become a Safe-Haven Asset: Bloomberg Analyst
Mike McGlone, a Bloomberg commodity strategist, predicts that bitcoin will transition to a risk-off asset during the second half of 2022…meaning he expects bitcoin to lose much of its volatility and become a safer place to stick your cash, like gold.
It seems a crazy assumption, I know. Bitcoin is the epitome of a risk-on, volatile asset—it has been the Pied Piper leading the entire cryptoconomy lower in the last nine months or so.
But McGlone makes the argument that bitcoin is emerging as a compliment to Treasury bonds and gold. Moreover, he says in a video interview with the crypto publication, CoinTelegraph, that the world is very likely heading into a global recession, “which probably will make bitcoin shine.”
He could well be right.
In the wake of the latest Federal Reserve rate hike, crypto has strongly rallied across the board. And crypto, more so than just about any other asset, is a leading indicator of sentiment because it trades 24/7 globally.
I’ve long stated that bitcoin is an inflation-fighting asset. The trend during this particular moment—an inflationary surge combined with a bear market in crypto and stocks—seems to mock that assertion. But as I tell friends who shake their head: Give it time.
Asset prices do not move on a schedule. By the time history looks back at the Great 2020s Inflationary Binge, bitcoin will have very likely proven its mettle as an inflation hedge…which implies that it becomes a risk-off asset, as McGlone predicts.
Moving on, let’s keep with inflation a beat longer…
“Sticky” Inflation Seems Like It’s Here to Stay
Mohamed El-Erian, the chief economic adviser at global financial services giant Allianz, recently explained that he expects inflation will become the most pressing issue America faces. He predicts that even as the economy slows, inflation will prove “sticky,” “broad-based,” and “entrenched,” and that it will likely become a “persistent phenomena.”
El-Erian, who I occasionally chatted with while writing for The Wall Street Journal, is worried that even if headline inflation slips, sticky core inflation will persist.
Core inflation excludes food and energy…so it’s expenses like education, medical costs, insurance, haircuts, oil changes, etc.
The Fed will struggle to bring those prices down because it has limited capacity to raise interest rates without destroying the consumer and corporate balance sheets, both of which hold historic quantities of debt that are impacted by every rate hike.
We’re going to end up in a world where inflation runs much higher than the Fed’s preferred 2% range. I wouldn’t be surprised if, a few years from now, inflation is consistently running at 5% to 7%. That’s going to be a world in which crypto, industrial commodities, gold, and the stocks of companies with pricing power shine.
In the meantime, the housing market is falling victim to rising interest rates…
Rising Mortgage Rates Tear Through the Housing Market
U.S. real estate purchases are increasingly collapsing, a sign that the Fed’s over-eager rate hike announcements are ripping through the housing market. That’s not likely to end well.
Redfin real estate brokerage is reporting that nearly 15% of home purchases were canceled in June. That represents about 60,000 failed home sales nationally, marking the highest level since March 2020, when the pandemic shut down the economy and cancellations hit 18%.
The Fed, forever behind the eight-ball, is the culprit. It lied to itself for a year saying that inflation was “transitory,” only to realize “whoops—not so much.”
Then, it held off raising interest rates for a few more months…only to then unleash large, 0.75 percentage point rate hikes not seen since the mid-’90s.
That, in turn, has seen mortgage rates double. Homes that buyers could afford at lower rates are suddenly unaffordable. Thus, home purchases are falling apart.
It’s clear that this will have an obvious and detrimental knock-on effect on the economy. Home prices are already collapsing in many markets as sellers whack 25% to 30% or more off the price of their homes in an attempt to sell. Real estate firms are laying off workers. So are mortgage companies. The housing market is very likely to sink into a recession that will ripple through other industries.
This all adds more conviction to my belief that the Fed is soon to cut rates to stimulate the economy, which will be a boon to crypto and stocks.
Speaking of crypto…
Crypto Continues Its Integration Into the Mainstream
A recent survey by consultancy giant, Deloitte, titled “Merchants Getting Ready for Crypto,” finds that nearly 75% of retailers plan to accept crypto as payment within the next two years.
As this survey proves, and as I have repeatedly written, crypto has a very bright future. It is the money of tomorrow.
Governments around the world, from China to the U.K. to the European Union, are exploring the adoption of crypto versions of sovereign currencies…brands like Walmart, Nike, Ralph Lauren, Taco Bell, Gap, BMW, Adidas, JPMorgan, and many others are already embracing crypto…and now, retailers are telling us that they are preparing to accept crypto.
Sure, crypto prices are down right now, but this is a bear market within a long-term secular bull market for cryptocurrencies.
That means this is a brilliant time to be a buyer of high-quality cryptos…before the next leg of the bull market sends prices up by 10x or more for many undervalued projects.
And that brings us to the end of this month’s Wire. If you have any feedback or any topics you’d like me to address in a future issue, you can reach me through the contact form on the Global Intelligence website.
Thanks for reading and for being a Global Intelligence subscriber.
