OBTC - Watch Jobless Claims - And Beware Bitcoin

2023-06-13 01:47:00 ET

Summary

• Weekly jobless claims rose to 261,000 last week, while continuing claims fell to 1.757 million.
• The Federal Reserve may pause rate hikes until the end of 2023, potentially avoiding a recession.
• Bitcoin's bear market rally may be stalling, with regulatory pressure on Binance and Coinbase affecting its price.

For the first time in a while, there was a notable jump in the weekly jobless claims last week. Granted, during the pandemic and the mandatory shutdowns resulting in a government-mandated recession, jobless claims were horrific, but during a more normal recession, they tend to spike into the 350,000-400,000 range and continuing claims tend to rise. Last week, the initial jobless claims rose to 261,000 from 233,000 the prior week, while continuing claims fell to 1.757 million from 1.794 million the prior week.

One week does not make a trend, and there were four outlier states with higher claims, but suffice it to say that weekly jobless claims are a “cleaner” number than the monthly jobs report that comes out the first Friday of the month, usually riddled with seasonal adjustments and later revisions. Plus, keep in mind that employment indicators tend to lag and, given the shortage of workers, they may lag more in this cycle.

We would all love to see a soft landing for the economy, but the only such soft landing after a Fed tightening cycle was in 1994-95. The rest of the “landings” after Fed tightening cycles have been hard (usually a recession) for decades on end. Be that as it may, this marks the first 500 basis point rise in the fed funds rate in such a relatively short period of time that has not triggered a recession, at least not yet.

If the economy lands softly, Jerome Powell will look very smart, despite the multiple mistakes he has made as Fed Chairman by over-stimulating to the upside and over-tightening to the downside after overselling “transitory” inflation, as he was behind the curve by chasing the lagging CPI reports.

The Fed has already signaled a pause coming at this week’s FOMC meeting. I think the next six months of CPI releases will look a lot better, but because of the lagging nature of the price indexes, I am not sure how the Fed will act in the next three months. If the Fed can have the patience to stand pat till the end of 2023, they will find out that no more rate hikes are necessary in this cycle.

Bitcoin is Back in the Crosshairs

Bitcoin is acting as if its bear market rally has run out of steam. The price stalled in the vicinity of the 2021 lows. With the SEC going after Binance and Coinbase (COIN), this cannot be good for bitcoin. Some of the allegations against Binance are similar to those made against FTX, even though the U.S. Justice Department has not yet been involved. One of the SEC allegations is that the commingling of client assets and Binance-related entities is larger than FTX by dollar volume, so this is likely to get ugly.

There is no way that an outcome similar to FTX will not pressure the bitcoin price. I don’t have a problem with blockchain technology, but I do have a problem with bitcoin. The problem is bidding up the value of a line of code, which has no cash flow, all the way to $69,000 and calling it an investment with a “market capitalization” in the trillions. Market capitalization is the discounted present value of future cash flows. If there are no future cash flows, the intrinsic value of bitcoin is zero . As to when bitcoin ultimately gets to its intrinsic value, I don’t know, but I do not believe that the 2022 lows of $15,480 will hold in 2023.

All content above represents the opinion of Ivan Martchev of Navellier & Associates, Inc.

Disclosure: *Navellier may hold securities in one or more investment strategies offered to its clients.

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