Dear Reader,
These days, I oddly find myself reminiscing about what life was like just two years ago. We were still in the early days of the pandemic, and most were working remotely, but the economy was strong and the consumer price index (CPI) was around 1%. It wasn’t very fun to be stuck at home, and travel was miserable, but things were generally affordable.
Yesterday, it cost me $150 for a tank of gas. It was less than half that two years ago. The shift just in the last 12 months has been so dramatic, it’s hard for us to get our heads around… And it’s painful.
So it wasn’t a surprise to see the latest CPI numbers this morning. They were bad…
Most of us have never seen such a steep runup in inflation in such a contracted period of time. It’s so steep that it looks artificial. And in many ways, it is, as it was policy driven.
At 9.1%, some were surprised it came in higher than expected. But when we go to the grocery store or the gas station, the reality is that it feels like inflation is even higher than that.
And core CPI, less food and energy, still came in at 5.9%. Also not good.
I do believe that there has been a lot of demand destruction within the last four weeks… we can see signs of it just about everywhere. Retail inventories are building up rapidly as consumers sharply cut back on discretionary purchases.
We can be sure that the Fed will choose to step in with another 75–100 basis point raise at the end of this month. It has already been priced into the market. But what happens after that is what’s most important.
The U.S. dollar continues to strengthen, which is having severe repercussions globally. Countries are looking to sell U.S. Treasuries to pay for critical goods and services. Basically, everything priced in U.S. dollars has gotten much more expensive. On a global scale, this is not desirable.
I continue to believe that the Fed is going to have to back off… It can’t afford to raise rates to any meaningful level to actually fight inflation. And yet it still needs to fund record levels of deficit spending.
It is going to have to ease and print whether it likes it or not. My best estimation is that the pivot will happen between mid-August and mid-September.
Until then, we should expect a volatile summer.
The opioid crisis remains one of the most pressing problems in the world of health and medicine. This hasn’t gotten a lot of attention since COVID-19, but it’s still very much a critical issue.
Simply put, the medical system’s primary way of treating pain for years was opioids. These drugs are fantastic pain relievers – But they are also highly addictive.
People become hooked on them even after their need for pain relief is gone. As a result, instances of opioid overdose are very high. In fact, nearly one million Americans have died from an opioid overdose since 1999.
It was a massive business. The Sackler family behind Purdue Pharma took in more than $10 billion of profits pushing OxyContin. And while Purdue Pharma took the fall in a $6 billion settlement this March, the health care industry was complicit.
So opioid alternatives are one of the hottest areas of therapeutic development right now. It is an area that I’m keenly following. And Northwestern University just came out with what could be a fantastic solution.
Here it is:
Implanted Pain Relief
Source: Northwestern University
This is a dissolvable implant that provides durable pain relief. It’s designed to wrap around the nerves responsible for sending specific pain signals in the body. Then it releases a liquid that cools the nerves – Cooling of the nerves lessens the pain that we feel.
The implant is just five millimeters wide. And once implanted, the device will dissolve harmlessly after a period of time. Ideally, the body receives the right amount of pain relief appropriate for a specific condition or recovery.
What’s more, this implant does not damage the nerves of the tissues within the body in any way. This is a major improvement over past alternative pain solutions like electric therapy and cryotherapy, which can cause nerve damage – making them a poor choice for systematically treating pain.
So I’m very encouraged to see this device showing great progress. There’s still a lot of testing that needs to be performed, but this may prove to be a great long-term solution to the opioid crisis.
In addition, there’s always the chance that a company will spin out to commercialize this new technology. Whichever approach cracks this problem is going to have a massive, multi-billion dollar opportunity.
The crypto markets have been absolutely beaten up over the last eight months.
As I write, Bitcoin is down about 71% from its high, set back in November. Ethereum is down roughly 77%. And many of the smaller cryptocurrencies have fallen even harder.
I have been watching the venture capital (VC) community very closely over this period. A large, material reduction in private investment would signal that the “smart money” has turned bearish on the crypto space looking forward.
But that’s not at all what has happened. Instead, venture capitalists are raising large funds to continue to invest in both blockchain companies and their underlying cryptocurrencies.
Year-to-date, we have seen over $18 billion invested in blockchain-related companies. That puts us on track to surpass 2021’s record year of over $31 billion:
Clearly, venture capitalists are very bullish on the companies that underpin the digital asset industry.
And the story gets even more compelling…
Bessemer Venture Partners, one of the oldest VC firms out there, just renounced its VC status to become a registered investment advisor (RIA).
This is quite the move for such a stalwart in the VC community. After all, Bessemer has operated since 1911. And the firm has assets under management (AUM) of over $19 billion.
So what’s this move about?
It’s really simple. Venture capital firms have historically been structured in such a way that limits their ability to invest in cryptocurrencies and other digital assets… That’s what this is all about.
Bessemer is making the shift in order to position itself to invest directly in digital assets. The firm sees today’s valuations as too great of an opportunity to pass on.
And Bessemer isn’t alone in this type of shift. Top-tier firms Andreessen Horowitz, General Catalyst, and Sequoia Capital have made the same move to become RIAs.
Collectively, these four firms alone have over $171 billion in AUM. That’s a lot of money that could potentially flow directly into blockchain projects and cryptocurrencies in the coming months.
To me, this is a strong indication of just how important the third generation of the internet, Web 3.0, is. That’s why we’ve made Web 3.0 a key focus in my Unchained Profits research service.
As we have discussed before, Web 3.0 is about taking the internet back to what it was intended to be – open, decentralized, and censorship-resistant. Of course, cryptocurrencies and blockchain technology are what make Web 3.0 possible.
So this is very bullish for the crypto markets. I expect we’ll see higher prices in the months ahead.
We talked briefly a few months ago about what MicroStrategy CEO Michael Saylor has been up to. This is just an incredible story… and he’s still at it. It’s one of those stories that will end up as an incredible gambit for the history books, or will be one that went terribly wrong.
Saylor just bought another $10 million worth of Bitcoin.
As a reminder, Saylor has evangelized Bitcoin (BTC) for years now. He moved $425 million of MicroStrategy’s cash reserves into Bitcoin. Then he borrowed against the company’s assets to buy billions of dollars’ worth of Bitcoin for MicroStrategy.
Over the years, MicroStrategy has spent about $4 billion buying Bitcoin, but at today’s market prices, MicroStrategy’s holdings are worth only $2.5 billion. That’s what makes this additional purchase so interesting. Saylor is down $1.5 billion and still buying more. Talk about conviction.
And in the long term, I don’t disagree with Saylor, Bitcoin will increase in value; but with the current market volatility and MicroStrategy’s leveraged position, we have to wonder if Saylor can weather the storm.
What makes this even more fascinating has to do with what we talked about on Monday – the Security and Exchange Commission’s (SEC) unwillingness to approve a Bitcoin spot exchange-traded fund (ETF).
As we discussed, the only Bitcoin ETFs approved have been futures ETFs. They don’t actually hold any bitcoin. They are just derivatives designed to mimic bitcoin’s price movements.
So MicroStrategy is effectively the closest thing we have to a Bitcoin spot ETF. And even though MicroStrategy is a legitimate business software and services company, generating around $500 million in annual revenue, it trades largely along the lines of Bitcoin because it has so much exposure to the cryptocurrency.
That means investors who want exposure to Bitcoin without opening up a crypto account can simply buy MicroStrategy (MSTR)… No SEC approval necessary.
Now, there’s been some speculation that MicroStrategy is at risk of a margin call given how much Bitcoin’s price has fallen. But Saylor vehemently denies that this is the case.
We don’t really know for sure, which is why this could end very badly. But think about this – MicroStrategy now holds nearly 130,000 bitcoins. That means if BTC hits $100,000, the company will have nearly $13 billion worth of Bitcoin. That would be something.
But aside from Saylor’s very directional bet, there is a trend that is developing in the world of treasury management.
Companies historically keep their cash balances in money market funds or treasury instruments. When interest rates were higher, it was a safe place to park cash and earn some income.
But these days, the treasuries are earning so little due to low-interest rates, and purchasing power is declining due to inflation, so treasury assets are being diversified looking for higher yielding returns. And “reserve” digital assets like bitcoin and ethereum represent interesting ways to do exactly that.
Regards,
Jeff Brown
Editor, The Bleeding Edge
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
