Morning Reads






Investors today are bracing for another inflation report north of 8%, though the number may provide some relief for those looking for the CPI to start cooling off. While April's Consumer Price Index is expected to come in at a flaming 8.1% Y/Y, the figure would be down from the 8.5% print seen in March, which marked the highest inflation level seen since the early 1980s. The CPI provides a snapshot of overall prices - meaning costs of certain goods can continue to rise - so also keep one eye on the core inflation figure (which excludes food and energy), as well as sub-sectors like cars and rent.

Quote: "I want every American to know that I am taking inflation very seriously and it's my top domestic priority," President Biden said Tuesday before the closely-watched report. "The first cause of inflation is a once-in-a-century pandemic. Not only did it shut down our global economy, it threw supply chains and demand completely out of whack... And this year we have a second cause: Mr. Putin's war in Ukraine."

Biden went on to propose solutions like "lowering everyday costs for hard-working Americans" through Medicare price negotiation and caps, improving operations at ports to reduce supply chain logjams and promoting competition to get smaller companies into the market. Lowering the deficit will also be a priority by "asking large corporations and the wealthiest Americans to not engage in price gouging and pay their fair share in taxes." With regards to cutting high energy prices, Biden said he had "led the world in the largest release of oil from our stockpiles in history," allowed biofuels in gasoline, and is driving green investment at the same time as near-record domestic crude production. Oil companies will also not get a "free pass" for unused oil leases (numbering 9,000 nationwide) and will be required to pay taxes on them if they don't produce more oil.

Not about one report: "I wouldn't say [today's] CPI matters by itself. I think the combination of March, [today's] and May's data will kind of be the big inflection point," said Ben Jeffery, a fixed income strategist at BMO. "I think it will either reassert the selling pressure we saw that took 10s to 3.20%, or I think it will inspire more dip-buying interest for investors who have been waiting for signs that inflation is starting to peak." (27 comments)

The Luna bin

It's not easy to engineer a new currency, especially an algorithmic stablecoin. Terra (UST-USD), the world's third-largest stablecoin, lost its peg to the U.S. dollar on Monday, dropping to as low as 69 cents and causing a swathe of investors to liquidate their holdings. Things recovered somewhat yesterday, before it tumbled below 40 cents overnight, causing widespread panic as the controversial stablecoin (which has a circulating supply of nearly 17B tokens) went into freefall.

Snapshot: There are basically two types of stablecoins, which use distributed ledger technology to attach the value of tokens to something that already exists. One is backed by cash and assets to maintain their value, like Tether (USDT-USD) and USD Coin (USDC-USD), while others do not have any collateral behind them like algorithmic stablecoins. Instead, the pegs on which these coins are built are supposed to be maintained through an arbitrage relationship with another cryptocurrency (in the case of Terra, it relies on a sister token named Luna (LUNA-USD)).

The problem is that it hasn't been working (at least for the past few days). The relationship solely depends on the belief that there is a particular floor to the currencies, hoping that one can always exchange (or print) Luna to guarantee the $1 peg for Terra. Aware of this dynamic, Do Kwon, the founder of Terraform Labs (which powers the Terra blockchain) has been diversifying into Bitcoin (BTC-USD) reserves for currency support - in case confidence eroded in Luna and Terra - but that could also be dangerous if Bitcoin becomes devalued as it has over the past six months. "Close to announcing a recovery plan for $UST. Hang tight," tweeted Kwon in response to the crisis.

Need for regulation: "[With stablecoins,] we see run risks, which could threaten financial stability, risks associated with a payment system and its integrity and risks associated with increased concentration if stablecoins are issued by firms that already have substantial market power," Treasury Secretary Janet Yellen said at a hearing before the Senate Banking Committee on Tuesday. "A stablecoin known as TerraUSD experienced a run and declined in value. I think that this simply illustrates that this is a rapidly growing product and there are rapidly growing risks. We really need a consistent federal framework." (2 comments)


Questions have swirled if Donald Trump will be allowed back on Twitter (TWTR) following Elon Musk's pending $44B purchase of the company, and yesterday we got an answer: Musk said he would reverse the permanent ban on the former U.S. president, calling it "morally wrong and flat-out stupid." Trump was barred from the platform in the wake of the U.S. Capitol attack on Jan. 6, 2021, after Twitter cited "risk of further incitement of violence" and "repeated and severe violations" of the network's policies.

Free speech focus: "I do think that it was not correct to ban Donald Trump. I think that was a mistake because it alienated a large part of the country, and did not ultimately result in Donald Trump not having a voice," Musk told the FT's Future of the Car conference. "If there are tweets that are wrong and bad, those should be either deleted or made invisible, and a suspension - a temporary suspension - is appropriate, but not a permanent ban."

While the measures Twitter took were legal - private firms aren't subject to the First Amendment - they highlight more starkly than ever the companies' influence over public speech and online conversation. Musk has referred to Twitter as the "digital town square, where matters vital to the future of humanity are debated," and some are worried that limiting conversation could end up hurting society or prompt less interaction among a broad variety of views. That could force many users into like-minded echo chambers that could reinforce their own beliefs and further polarize the political landscape, but the alternatives of no moderation can be just as scary.

What is Trump saying? Well, the whole story is coinciding with the rollout of his TRUTH Social network, which is publicly trading under ticker symbol "DWAC." Trump has previously announced that he wouldn't return to Twitter, saying they had "gotten rid of a lot of their conservative voices," but things could turn around quickly before coming election cycles. TRUTH Social has also been plagued by technical issues since its launch, as well as some executive departures. (210 comments)

End of an era

The MP3 player wars in the early 2000s were being fought by Archos, MiniDisc, SanDisk, Zune and others, until the iPod was finally embraced by the masses. Apple (AAPL) went on to win even more consumers with its robust lineup that included the iPod Classic, iPod Mini and Nano, iPod Shuffle, and eventually the iPod Touch. While the iPhone and the streaming era rendered many of the devices obsolete, the last iPod Touch stuck around over much of the last decade, until powering down - permanently.

Some history: Apple last updated the iPod Touch in 2019, keeping it around for a select demographic of users. Some people wanted the features of an iPhone (without actually having a phone) like sending iMessages and FaceTime via a Wi-Fi connection. However, the device that is now in its 7th-generation is coming to an end, with an announcement that last iPod Touch will only be available in store "while supplies last."

"The demise of the iPod is probably the best example of Apple not being concerned about cannibalizing its own products," noted Carolina Milanesi, principal analyst at Creative Strategies.

Corporate statement: "Today, the spirit of iPod lives on. We've integrated an incredible music experience across all of our products, from the iPhone to the Apple Watch to HomePod mini, and across Mac, iPad, and Apple TV," said Greg Joswiak, Apple's senior vice president of Worldwide Marketing. "Apple Music delivers industry-leading sound quality with support for spatial audio - there's no better way to enjoy, discover, and experience music." (17 comments)

Today's Markets

In Asia, Japan +0.2%. Hong Kong +1%. China +0.8%. India -0.5%.
In Europe, at midday, London +1.1%. Paris +1.8%. Frankfurt +1.1%.
Futures at 6:20, Dow +0.9%. S&P +1.1%. Nasdaq +1.3%. Crude +2.8% to $102.56. Gold +0.5% to $1850.50. Bitcoin +1.1% to $31,760.
Ten-year Treasury Yield -5 bps to 2.95%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
12:00 PM Fed's Bostic: “An Update from the Atlanta Fed: Economic Outlook and Monetary Policy”
1:00 PM Results of $36B, 10-Year Bond Auction
2:00 PM Treasury Statement

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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