From recession fears to a bullish setup in one week

Transcript

GM good morning welcome to the milk Road show The Daily crypto show where we serve news as hot as your morning toast I'm your host Jay Hamilton and today we're talking about very positive economic and macro data out of the US this week here to guide us is milk Road co-owner and head of research Kyle reidhead Kai let's start with what happened this week compared to where we were just a few days ago with economic data that came out of the US yeah so we had a nice episode I think on Monday or Tuesday with Lark where he talked all about the chances of recession great Episode by the way absolutely love that

and um things were looking maybe a bit Grim in his episode so we had a bunch of data that came out this week many of it actually really good in terms of reaching a potential soft Landing we'll start with on Tuesday we had the PPI uh which came out PPI inflation this is the cost to produce goods and that was actually lower than expected uh it was 2.2% and expectations were 2.3% so this is really really good core PPI inflation fell even more it was 2.4% below the expectations of 2.7 so this is generally a good sign as CPI tends to follow PPI not always depends where you're in the cycle but either way really good the next day on Wednesday we had CPI come out and this one came out at 2.9% expectations at 3% so really good to see

inflation under 3% uh for the first time in a while while I'm not sure when the last time we we managed to get below 3% um but I think it's been at least over a year if not longer 2021 March last time we were below three wow okay so obviously good news there then just this morning actually as we record which is Thursday we had a few other ones that came out which was jobless claims um which was below expectations once again so um it was 227,000 versus the estimations of 236 ,000 uh and then retail sales uh which were 1% estimated at 0.4% so what does this all mean it means

inflation is still coming down and looks like that trend is going to continue well at the same time the economy is actually doing quite well if you remember from Lark's episode the other day if you haven't watched that go check it out the whole concern is will the economy collapse along with inflation and if inflation goes down too much then that's no good because that means we're heading to recession if unemployment and job claims and all these things are really bad if people aren't buying things consumers aren't spending that is really bad it means we're going to recession and it's likely we're going to have a big shock in markets well at least this week and again this data comes out pretty frequently so this doesn't mean we're for sure out of the weeds but what we saw was low inflation but not too low right and then we saw

lower job claims right which is good and we saw some pretty decent retail sales meaning people are still spending but they're not spending too much that it means inflation is going to go up higher so so far we're sort of of like threading the needle right now on the economy in the US and so we got to give some Kudos over to our boy Jerome Powell uh for not moving rates not doing too much actually just making things just right so far we'll see what happens again this doesn't mean that this is all the be all end all we still have a lot more to go here um what we're seeing right now in terms of unemployment is it's still trending up we haven't had a new unemployment release yet this week uh and so that doesn't come for a little bit so if you look at the trend of

unemployment it's up but it's up just a small amount it's trending upwards takes a long time for that to change no quick like month over month is just going to all of a sudden change that takes a while for that Trend to slow down the key is we don't want employment to go up too much we want it to continue to go up to be honest I know that sucks for those who who need a job but we do want it to go up continue to go up just a little bit more so that Powell in September does uh lower rates we just don't want it to go up too much where he has to like lower rates a ton or again we have fears of going into recession so again we just don't want any big crazy moves we just want little bit here a little

bit there we want the economy to be great but not that great and we want inflation to go down but not too much and so that's the the world we're in right now which is kind of funny uh but it seems to all be working out as we've hoped so it's a lot of good news at the moment one question that we're getting a lot from our listeners and our uh Pro members in our Discord is this concept that we've been talking about for months which was that we want bad news and now we're saying okay this is good news but I thought we wanted bad news Kyle can you explain this good news bad news without saying good news and bad news too many times so we wanted bad news because we needed the economy to be not

so great so that PO would the FED would lower rates and give us some liquidity okay so we wanted bad news for a while there we got our bad news over the last few months now we're at a point where the bad news is here and now we need a little bit of good news okay we flipped so now you don't want bad news anymore we want actually good news we want inflation to go down we don't want the economy to be so bad we want things to get better and better and better and so but again but not too much so at this point we flipped and now good news equals good news and so that's what we're looking for is just good news moving forward but not too good uh so anyway I I did say good news and bad news too much as you asked me not to but

just the way it goes so we're in a we're in a weird time in markets um but somehow uh drone pal seems to be threading the needle I think what happens here is because of the numbers we've seen at least this week probably next month in September he's going to lower rates there's speculation is going to be 25 basis points is it going to be 50 basis points a lot of people thought it might happen sooner because of what happened with um Japan which by the way that's still an issue and we still don't know what's going on there so far um the Japanese have kind of stepped back and said we're not going to keep raising rates uh but this morning there was a bit of a jump in the um in the end so things are still a little bit iffy and shaky over there so we have to keep our

eye on that um but our focus is mainly on the US market of course but just hopefully Japan can figure their out and it doesn't ruin this potential soft Landing that that Powell is looking for so I think we'll probably see a 25 basis points uh drop in the US maybe we get 50 uh we'll see the percentage isn't that high anymore uh but 25 should be fine uh and as long as we just continue to do that I think we're pricing in something like eight basis points or eight Cuts in the next year or so uh and so as long as again the data continues to do well like we're seeing then um I think we're going to see a nice soft Landing here which means probably not jumping into recession although again we can't rule it out but likely just things got bad but not so bad and so we can

lower rates we can start to pump out liquidity which is already Rising across China and the US uh and that means really good things for risk on we're still not there yet so we're not in the banana Zone as we call it uh as many people are saying crypto Twitter um but we are getting the sort of signals that might get us there again we still got to wait and see nothing's a for sure thing um but things are looking pretty good after this week good to hear that good news is good news again and if you're confused about bad and good news join milro Pro and we'll explain what the heck we're talking about to you in great detail uh Kai what what I'm hearing through this conversation today is a lot of talk around monetary policy a lot of talk around the impact that governments

are having on markets now you get a great episode a week ago all about how we are in this current state of monetary policy impacting the markets can you connect that one more time for everybody around why Japan and the US and the fed and all these economic datas even when you know CPI comes out and it's just 0.1% different somebody might say it's only 0.1% that's not a big a deal but these little things seem to be making a big a big impact on the market right now yeah so remember it's it's all about liquidity and what we need is just the fed's ability and and central banks around the world to just print money which they're going to basically do

anyway the key is we want them to be able to do that in a low inflationary environment uh and that seems to be what's happening here so um the the whole idea is we need to invest when the the dollar is going down or when Fiat currencies are being debased I talked about this a lot last week and that looks to be happening the US dollar appears to be weakening which is coming because when you lower rates when you increase liquidity the dollar has no no choice but to get weaker every time we have seen the dollar get weaker we go into bull markets and I believe that is where we're at right now the dollar peaked back in I I think it was 2022 I don't know if we have a chart of the of the the Dixie right now but if we did

you'll see that it peaked back then and that's when we had our big move uh in 2023 now it's sort of been just range Bound for the last little while and it looks like it might start to drop and that again that's just the market sniffing out that hey rates are about to go lower when rates go lower obviously the dollar gets a bit weaker uh and so that's a signal telling us hey bull market coming and so again it's all points to the same thing which is liquidity and we just need the ability or the governments need the okay to print and right now as we have a worse or a weakened economy that means that they can start to print money and as long as inflation's not high or too high then they're good to go and so again we're sort of reaching that moment where

same as we always have right now it's been these four year Cycles since um since really 2008 um but I actually wonder if we can even get into a recession these days uh because again as you said we're so controlled by monetary policy that as things get weaker we just lower rates and then we print money we've been printing a bunch of money this year already and so like maybe we should have gone into recession it's just the FED doesn't let us right and Global banks around the world don't really let us go into recession we haven't had a recession since basically uh 2008 now we had one during covid but that was obviously a um you know there's an asterisk to that one and it was like a couple dayong recession it was just based off certain indicators um but they printed our way out of it and so again

what are we seeing here as the economy weakens instead of letting us get into recession and let things figure it out we just manipulate right we lower rates and we print money and so um I just I wonder at least at this point when we're in so much monetary policies I talked about last week I just I wonder if we can even get into a real recession uh and I just I don't know that we can uh and so all eyes on liquidity all eyes on r rates and um yeah I think things look good right now and more T more closely tied um between the liquidity and the impact on markets when we're in these heavy monetary Cycles as we are in right now now one question that we're seeing a

lot as well which quite honestly I'm also confused about this so I hope you can explain this for us Kai is onchain activity appears to be hitting all-time Highs but yet price action of crypto tokens is is not it's it's what's going on why is there not this connection uh and maybe you can I've got the chart of active addresses from A6 Z so maybe you can give us an idea of what's going on for our listeners here yeah so right now markets don't care about what's happening in Tech right they only care about what's happening in macro they only care about liquidity okay and once macro tells us hey not a recession time to go into bull market you know dollar

weakening blah blah blah all the things that we've been saying then this stuff matters and so if you look the chart you have up right now is a great chart by the way it's super super bullish crypto which is basically month over month we are reaching all-time highs in active addresses July was just shown here and and we and we just passed June's alltime highs we're at what 54 million active addresses online this is ACR or on chain this is across all blockchains and so the best analogy for this is if you think of onchain activity it's like pouring a bunch of gasoline on top of a log right so obviously that should have a big impact on a fire except there is no fire and so it actually doesn't matter now once the flame is lit the match is struck which is macro all of a

sudden that gasoline that's on that log it really freaking matters and so if you think about this in reality what's happening here when macro goes risk on what it means is okay rates are down liquidity is up it means there's a lot of money because money is now cheap to go somewhere to go into some sort of investment right and now where do those Investments go is the question when we go risk on well it's going to go where there is adoption at least in terms of tech right it goes in where the money could potentially grow the most and so what institutions look for what investors look for is where is the adoption where is the growth where is the Innovation and right now it is definitely in crypto because you're seeing the onchain activity go up and up and up and up and up and so whenever we

get that signal of risk on the banana Zone that means a lot of that money is probably going to come to crypto because it has adoption it has growth it has new users coming in all the time whereas if onchain activity wasn't good and we got this risk on environment a lot of money still wouldn't come into crypto right it might go into AI or it might go into robotics or it might go into whatever else but because we are seeing this buildup of onchain activity we are seeing the fundamental um numbers of crypto get better and better and better once macro turns the way we need it to and that and that match is struck and the flame is there it's going to just go absolutely nuts which is the same thing that happened back in 2020 2020 we had defi summer everyone was using D5 for the

first time we finally had all this activity on chain after like years of basically everyone thinking crypto was dead but things still didn't go up we had to wait and all of a sudden after covid we kind of got out of this recession and they started printing a ton of money and rates went to zero but what happened there was so much money in the system everyone said where should I put it and he was like well crypto has a ton of adoption right now I'll put it there and then we blew up and at the end of 2020 in 2021 we just went in this crazy bull market it looks like we have the exact same setup here we've been on pause in terms of prices since basically March right but that's not because crypto isn't doing well if you look at stable coin activity you look at onchain

activity you look at what's happening with dpin and helium and all the things adoption is there and it's getting more and more and more it's just we haven't had that flame yet from macro and so another analogy you can think of right now is like the more that onchain activity picks up and the more we get this adoption and growth in crypto without macro there it's like holding a balloon underwater and just like continuing to push it there and the moment that you remove your arms what's that balloon going to do it just goes sh and it shoots up out of the water and flies in the air that's what's happening right now with crypto prices okay and so it's all coming into fruition all the things we want we just need we just need macro to get figured out and it looks like it will at least from the data

we've seen this week now of course it doesn't mean it will for sure nothing is a certainty but our investments our portfolio is set up in the um with the idea that it is going to go our way and so we'll see if drone pow can thread the needle and we can get this uh get this soft Landing um but the backdrop of what's going on in crypto is set up perfectly and and I didn't even mentioned the ETF stuff right like you've got Bitcoin and eth ETFs you've got tens of thousands of advisers all around the US which are going out to teach others all about Bitcoin and eth because they need to make sure these ETFs do well what do you think is going to happen when the macro environment turns and we go RIS gone I just there's just the perfect setup here um so uh

anyway looks good in my end so question and last question to wrap up here is I think and I I know you don't have a crystal ball but what are the things that you are looking for that will indicate that we are getting the macro setup that we need that we are entering that risk on banana Zone time and do you have any idea is it is it the next RIS cut coming in September like obviously that's a big date what are the other things that our listeners should be watching out for in the coming months honestly the key is just keep doing what we're doing right now inflation below 3% is just is key that that's the big thing because that sets us up to be able to

continuously lower rates I don't think we're going to have some big like 1% rate cut or whatever I think it's just going to be 25 bips in September maybe another 25 in October at least this is what I hope and we just slowly grind down in terms of rates if that that happens perfect if they have to do some like immediate huge cut that's going to be problematic we want it to just be gradual and so I think let's see rate cut in September and then again in October ideally or November whatever let's see inflation remain below 3% honestly unemployment can continue to rise uh I'm not mad about that but rise slowly uh nothing too crazy there uh and then I think we're just going to see liquidity go up and up and up over the next few months we're already starting to see it we've just reached all-time

highs last month and so like or sorry a few weeks ago I think it was and so all the things are set up and I don't know why people are so bearish it's because there's just some weird metrics in terms of like the all the different indicators that show recession a lot of it is confusion around unemployment I just think we live in a very different world postco than we did before and so some of the old indicators just don't really work so much anymore like Jay if you think about our company for example we hire close to 30 people not one of them are an employee right actually we have two employees in our company and they are both in the US but neither of them are American right everyone else is is a contractor a freelancer right and they're full-time but they're contracted

because they're remote they live in different countries around the world Etc and a lot of companies are going this route and so a lot of people are going freelance a lot of people are starting their own companies because of the internet uh and a lot of people work as contractors because they're just in different countries and so like the unemployment numbers and the jobless numbers and all this stuff is just it's very different than it used to and so I think a lot of the data is kind of mixed and so you have these weird signals telling us that we're in a recession or things are are worse than they actually are and I think there's just an and plus immigration has changed so much now and so it's just it's a weird world world out there and I just don't know that a lot of the old indicators still matter

there's still a bunch that do of course I just think it's very confusing now and um I don't know when I look at where the economy's at like I live across from the mall right now Jay and I look at every day and the mall parking lot is freaking packed every single day and I took a picture and I posted on Twitter yesterday was literally just like every single parking lot was full on a Tuesday afternoon this week and I was like why what is going on you know H but I just I just can't see that we're in that bad of recession and to be honest in Canada the rates have affected us way more than in the US uh because most of Canadians have variable mortgage rates whereas in the US everyone locked in at like zero perent ratees so like the the interest

rates aren't that big of a deal uh in terms of like consumer spending in the US so um for me I just think we just need to see things continue to go as they are it looks pretty good the main thing I'm watching for and I'm scared of is Japan uh if that continues to break then it's going to be hard for the US to lower rates if Japan has to and is forced to raise rates that's going to make that carry trade a really bigger deal than it is that is a big deal in the sense that there's trillions of dollars in it but like you know the the Japan moving up to 25 basis points isn't that big of a deal becomes a big of a deal if they have to keep raising and the US has to keep lowering because then there's like even the non-risky stuff in

that carry trade needs to get Unwound which right now it doesn't so that's like the only thing that's really on my mind that worries me but I don't know I kind of think we'll figure out a way through that uh and probably just means we're gonna have to print money to fix it anyway so like I always go back to the same thing which is just like it's all about liquidity and if we just look at the liquidity charts they're just they're up and I see no reason why they won't continue to go up so it's hard to be it's hard to be bearish at this point um I don't does that answer the question yeah completely I I also like that you finish with it's hard to be bearish because we certainly have had a few weeks here of a bare Vibe a bare

Vibe and a feeling of of fear in the space which is is strong fear is a very strong emotion for every and I don't think we're out of that yet so like people still need to be patient it's funny we put out a pro report last week so Saturday five days ago saying like hey here's what happened with the Japan carer trade here's how we had that big shock last week and you know we think it's all good and then it's Thursday today as we recorded we had so many people in our Pro Discord going guys what's happening things look so bad Lark's you know episode on Tuesday or whatever like everything's scary and I was like guys like can we get an update and I was like I just gave you one five days ago our nothing's changed what do you mean if anything everything looks

much better so we got to be patient and just let this all unfold the I think the rate decision for the US is until like September 18th so like a month away still so like this is probably going to be a little bit choppy and painful for the next few weeks at least uh and then there's still the election to get through so maybe we have to wait until after November 6th or whenever the election is uh until we go full bull I don't know um but just we got to be patient right now and just let things unfold these things don't happen in a day they happen over weeks to months uh and much longer and as I've said every time on this episode we are invested for the cycle which is 12 to 16 months potenti even longer we are non invested for the next couple days to weeks so

again just don't worry too much about the next couple weeks there's like a month left in summer go enjoy that wait be patient no that's not I I I can't do that I we did an episode yesterday with zenica all about psychology and I think everyone needs to go listen to that uh and try to manage psychology because summers are tough man these summer laws are actually really really tough it happens a lot like the big money leaves they go to The Hamptons and they just they take the summer off and so like nothing happens during Summers there's been a lot of volatility so it feels like lots has happened but when you look back we're just where we were back in March right we're at the same level as we were back in March except in March everyone was like holy so bullish this is the best Bitcoin

at 60k or whatever and now we're at 60k and everyone's like oh my God the world's ending it's like dude that was four months ago or maybe five I'm not sure what it was now but like it's really not that big of a deal um but we when it's boring in the boring zone right it's it's tough to manage the psychology yeah it's it's so true I want to know you listeners I want to celebrate anybody who has not made Moves recently so Post in the comments other than buy if you bought that's fine yeah let us know if you if you're sitting on your hands and I'm gonna give you a high five or let us know if you're just doing your same old boring DCA like rock on good for you because everybody else they're you're the ones that need to go listen

to the psychology episode from yesterday because you're probably the ones that strugg Kai thanks so much for joining us again today if you liked Today's Show would really appreciate if you guys give us a like And subscribe to the channel because as Kyle said five days ago things were different and five days from now things will be different again so we want to make sure that you guys stay up to date and that's why we put out episodes every single day to keep you in the calm Zen to have that calmness to be able to make smart informed investment decisions remember none of this is finan advice investing in crypto or any asset is risky and you should only invest what you can afford to lose thanks so much for listening in everybody have a wicked

awesome day