Welcome to your April 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.
First up this month…
“Crypto Farmers” Pocket $1 Million in Free Tokens
Yeah, I know… it sounds like total BS.
I get it.
But it’s legit.
It’s all part of a new wave of bullishness sweeping the cryptocurrency market these days. As part of that, there’s been an increase in the number of high-profile “airdrops.”
Airdrops are events in which crypto companies send tokens for free directly to a user’s wallet for one reason or another, often tied to that user having recently interacted with a crypto project in some fashion.
In many cases, airdrops don’t amount to very much. But sometimes the amounts are eye-popping. Indeed, a group of so-called crypto-farmers have collected close to $1 million on airdrops in recent months.
Now, they had to jump through some hoops, such as back-and-forth trading, but their individual wins have been huge!
They collected close to $300,000 worth of tokens in the recent airdrop from a crypto project known as Blur, a new marketplace for non-fungible tokens, or NFTs, the digital art crypto that has gained such a fan base over the last two years. And Arbitrum, a new blockchain competitor to Ethereum and Solana, awarded them with about $180,000.
In late 2020, I was part of an airdrop for Uniswap, the largest and most popular decentralized exchange where crypto investors can buy and sell tokens without a middleman. I was part of that airdrop simply because I’d been using Uniswap for a couple of months. The 400 tokens I received were immediately worth $4,000, and at their all-time high were worth nearly $18,000.
What this tells me (and what I have been saying for several months now) is that crypto is back in a stealth bull-market. No one wants to believe it because the carnage of last year’s bear market was so devastating. Nevertheless, bitcoin has moved above $30,000 recently and Ethereum just crossed $2,000—levels the world’s #1 and #2 crypto haven’t seen for nearly a year.
Bitcoin and Ethereum are back in a solid uptrend, which is good news for our investments.
Moving on to…
Oil Prices Will See Triple Digits
If you’re a regular reader of the Wire, Global Intelligence Letter, and Field Notes, then you know that I’m mega-bullish on the future price of oil.
In a nutshell, the Pollyannaish/sometimes-militant, green energy lobby has convinced government to go all-in on green. And that has caused a not-unexpected ripple… the energy industry for the last many years has under-invested in finding new oil and gas reserves.
The green lobby has spun a tale of green energy as a “clean” superhero. Alas, this tale, like many tales, is tall and often obscures the truth (like the fact that electric vehicles demand gazillions of pounds of copper to exist, and it just so happens copper mining is one of the dirtiest gigs on the planet. But hush with these inconvenient truths, you blasphemer!).
Investment firm TD Wealth, part of Canada’s TD Bank Group, has been digging into this trend.
Hussein Allidina, head of commodities at TD Asset Management, recently noted in an interview that oil is headed back above $100 per barrel. (As a reminder, I see oil going well above $150 with spikes to $250 or more.)
I won’t steal Hussein’s thunder—his interview is an interesting read. I will only say that Hussein comes at this from a very sober-minded perspective. Nothing he says is over-the-top. He’s modest in his assumptions, level-headed about the pros and cons of the economy and oil market today, and he’s not saying oil will ram past $100 next Tuesday.
Nevertheless, he sees the industry facing challenges from the same under-investment crisis I’ve been writing to you about for months.
As he notes, “Without that investment [in finding new reserves], prices will eventually—when the demand growth is there—have to move to a level that rations demand.
“And that’s not $80 a barrel. That’s triple digits.”
Next up… ever-rising debt.
Consumer Debt Continues to Grow, Setting New All-Time High
Along with piling living expenses, vacations, and luxuries onto their credit cards, Americans are also racking up debt for mortgages, auto-leases, and home-equity lines of credit. And that’s soon to cause a big problem in the economy.
As TheStreet.com recently reported, cumulative household debt in America hit $16.5 trillion in the fourth quarter of 2022, the most-recent data. That’s a new all-time high.
Debt, as so many people have found out, is an evil temptress—promising easy access to an aspirational life, then invoking the “pain and suffering” clause when mountains of debt accumulate and interest rates begin to rise.
Uncle Sam is feeling the pinch right now. With interest rates at highs not seen in decades, interest payments on America’s $31.5 trillion debt are the highest in history. Consumers are hurting too, for the exact same reason.
Alas, consumers lack the power of the printing press to paper over their profligacy. Instead, pain and suffering are the order of the day, and that ripples through the economy as a slowing pace of growth… which freaks out business owners who revert to cost-saving mode and begin laying off workers… who no longer have a paycheck and, thus, end up defaulting on credit-card balances, auto loans and leases, and ultimately their mortgages.
This scenario is what Moody’s Investors Service is telling the markets to prepare for: “We expect credit card and auto loan delinquencies and charge-offs to soon eclipse 2019 levels and continue rising, as inflation and the weakened job market weigh on household budgets.”
Residential mortgage defaults will also deteriorate, though the ratings agency expects it will do so “only moderately.” I am not sure “moderately” is the correct prediction, but we shall see.
Expect bankruptcies to rise. Expect home prices to fall even more. But do not expect inflation to die off. That’s going to remain an ongoing problem for much of this decade still.
Next, Treasury Secretary Janet Yellen is…
Saying the Quiet Part Out Loud
In a Field Notes dispatch last October, I wrote that we were quite likely to see bank failures erupt in the U.S. because of the Fed’s rate-hike regime across 2022. Lo and behold, bank failures defined the month of March.
Worse was that after Silicon Valley Bank and Signature Bank went to the great bank vault in the sky, news emerged that almost 200 other U.S. banks are also on shaky footing.
A tidal wave of bank failures is scary enough, but along comes Treasury Secretary Yellen to double down on the pending death rattle of U.S. banking as we know it.
In a recent hearing on the bank failures, Sen. James Lankford asked Yellen about the decision to bail out every depositor at both failed banks. Typically, FDIC insurance only covers a depositor’s first $250,000 on deposit. The feds disregarded that rule and covered billions of dollars that otherwise would have been potentially lost. Sen. Lankford rightly wanted to know if this was now the federal government’s standing policy in the event of future failures.
The secretary’s answer should give you pause and maybe have you rethinking your relationship with your current bank:
“A bank only gets that treatment if a majority of the FDIC board, a supermajority of the Fed board, and I in consultation with the president, determine that the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”
Lots of gobbledygook in there. But read between the lines and there’s a huge message she’s sending: Uncle Sam is prepared to backstop banks that present a systemic risk to the economy. And there are only a few such banks—America’s biggest banks. The likes of Bank of America, Citi, JPMorgan, Wells Fargo, and maybe one or two others.
The rest of America’s 4,000 or so local, regional, super-regional, and community banks are decidedly not on that list of systemically relevant institutions. Which means that while the feds stepped in to save depositors at Signature and Silicon Valley Bank, there’s absolutely zero guarantee they’ll do that if the 1st State Bank of Wherever collapses.
Which technically means that anyone who banks at a non-systemically important bank and has more than $250,000 on deposit—even as part of a small business—is very likely screwed if these banking failures expand (a very real risk).
I’m not telling you to run and close your bank account. I’m not doing that with the regional bank I use in Florida or the local bank I use in South Louisiana. Instead, I’m saying that Yellen is telling Americans—maybe on purpose, maybe accidentally—that you have to think hard about where you’re banking these days.
Money is already fleeing smaller banks for the systemically important giants. Do not be surprised if that trend continues, which will only exacerbate the bank runs and failures to come.
Finishing on a somber note…
American Families Struggle as Inflation Continues to Bite
I’ve been saying for many months now that inflation would hurt much more than the Federal Reserve and the U.S. Treasury were letting on. Now, the proof arrives in the form of a recent CNBC survey that shows way too many American families are struggling financially these days.
CNBC’s Your Money Confidence Survey found that nearly 60% of Americans are living paycheck-to-paycheck. Seventy percent say they’re “stressed” because their family finances are so shaky.
Perhaps worse is that 53% of those surveyed say they don’t have an emergency fund, and 40% of those that have an emergency fund have less than $10,000 in it.
That lack of emergency backstop is not new. It’s been an ongoing challenge for American families for a number of years now, according to various Federal Reserve reports released over the years. But it’s particularly pressing these days as inflation rages through family wallets.
As other statistics have revealed in recent months, Americans are increasingly having to rely on credit cards to make ends meet, which explains why yet other statistics show that credit card debt in America has reached more than $930 billion. That’s a staggering number—almost $1 trillion in credit card debt. Uncle Sam’s annual budget is just $6 trillion, to give you some comparison.
What makes this more painful is that the Federal Reserve’s over-aggressive interest rate hikes over the last year have sharply elevated the interest payments due on all that credit card debt.
That is 100% unproductive spending since it does nothing to better the family’s situation or grow the economy. It’s dead money. But it’s certainly a major factor in why many families are feeling so much pressure on their wallet these days.
Alas, the pressure is likely to increase before the situation improves. And with a recession lurking, the resulting job losses are going to be exceedingly painful to the economy and the families who have no financial buffer for when that day arrives.
With that, we’ve reached 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.
