Stagflation, Protests, & Tech Pumps
271: Campus Unrest, Russian Cyber Attacks
Alright guys — quite a bit to cover today — but first some housekeeping.
The 2024 Deal Sled/Bit Loafer Review will drop next week (for paid subs).
We have gone through more official channels to hopefully alleviate the shadowbanning/reach throttling happening on the Arbitrage Andy instagram account. I’m optimistic we will be able to address and solve it.
I will be revamping the Arbitrage Andy store completely sometime this summer — the new focus will be higher end products, merch, and guides as I will now have the ability to physically handle orders and product. I am doing my best to clean up delayed orders, issues, etc before that transition.
Given we are in a pivotal election year where there’s more than enough digital mayhem — I highly suggest following all of our relevant accounts including: Arbitrage Andy and Arb Letter on Instagram, Arbitrage Andy and Arb Letter on Twitter, and of course Arb Letter here on Substack.
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As I mentioned the 2024 Deal Sled review will drop next week but today is going to be a complete overview of all relevant news for financial markets/crypto and geopolitics/global news.
Yesterday President Biden announced a new proposed to raise capital gains tax to roughly 44.6%, marking the highest formal federal capital tax in history. The suggested tax rate — as well as an additional proposal to impose a 25% tax on unrealized gains — has garnered massive attention across social media despite the information being public for more than a month (CoinTelegraph). You read that correctly — the Biden Regime is proposing taxing UNREALIZED gains.
We will dig into what this means for most Americans — and the truth is it’s pretty far fetched but it does raise some important questions and points worth considering when paired with other developments originating within the United States.
I want to stress something — none of us, with the exception of the ultra ultra rich — are gaining more freedom. We are losing it — in rapid fashion. More importantly, the ability to transcend socio-economic classes is diminishing quickly. Stagflation, or persistent high inflation combined with high unemployment and stagnant demand in a country's economy, seems to be setting in, especially if one considers the recent
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Financial Markets & Crypto
With the recent reports and data indicating Real US GDP growth in Q1 2024 at 1.6% (vs 2.5% expected), inflation is becoming a bigger concern as is the phenomenon of stagflation. The Kobeissi Letter pointed out:
At the same time, the US Core PCE Price Index soared from 2.0% to a staggering 3.7%. This crushed estimates of 3.4% and further suggests that inflation is on the rise. We have a weakening economy with rising inflation. The worst possible outcome for the Fed.
Additionally, the 10-year note yield has risen to 4.73%, its highest level since November 1st, 2023.
You may have been able to forecast this outcome yourself based on our recent piece highlighting accelerating layoffs, and major financial institutions including Goldman Sachs got this call completely wrong — the Kool Aid is strong right now in major US institutions.
One thing is likely — rate cuts are not happening this year.
It will be an interesting period leading up to the US election given this outcome and the bizzare proposal by Biden that is sure to move elite voters from blue to red, even if it is far fetched.
The rhetoric is enough — and many more Americans who are not in the 0.1% have been feeling inflation, raised costs, and less purchasing power for a long time now. The “narrative” that everything is fine is wrong and the truth is beginning to emerge at an extremely inconvenient time for the left.
Tomorrow we will receive the latest PCE inflation report
Chipotle in an email to employees last week asked that people stop adding chicken to their own meals to deal with low supply: “We need your help to keep up with our guests’ demand for this popular protein option”
The SEC has delayed the decision and opened a comment period on whether or not to allow options trading on spot Bitcoin ETFs
Southwest Airlines has announced it will shed around 2,000 employees globally as part of a cost cutting drive (MarcoEdge).
Stripe announced this week it will bring back crypto payments
US 30-year mortgage rates have hit 7.29%, per Bankrate
Crypto firm Consensys sued the SEC this week and asks the court to declare that Ethereum ETH is not a security
GOOG 0.00%↑ is up 15% after hours after crushing earnings - the company reported revenue of $93.5 billion and EPS of $1.89.
Roku, Microsoft, and Amazon are also up over 5%
We will see how the market reacts to PCE tomorrow but for now in the after hours it would appear that we are back in a risk on environment defying most people’s logic.
I am adding PLTR 0.00%↑ MSFT 0.00%↑ and INTC 0.00%↑ on the dip.
On the crypto front sentiment is a mixed bag. Markets have softened a bit leading up to and immediately after the halvening date.
That being said — if you read my post on Meme Coins — you will know that the coins that will pump the hardest at the official top of this bull cycle are the ones that show the highest relative strength and bounce-back after sell offs. This includes Boden, WIF, PEPE, and APU for the most part. Our degenerate play on $ZYN was knocked down a few pegs by a cease and desist letter.
Still apeing.
COIN 0.00%↑ earnings come out next week and of course we have an ETH ETF on the horizon. Personally, I’m viewing much of the recent price action as shakeouts — I hold quality crypto long term from years ago and I only hold about 5% of all investable capital in meme coins and higher risk plays.
For those of you who have been participating in the Blast airdrop ecosystem May will hopefully be an awesome month. I am bullish on ETH through the end of the year and await a n ice true pump for blue chip alt coins who have been overshadowed recently by meme coins and animal coins.
The regulatory battle is surging in the crypto space with rumors that Gary Gensler will soon step down after a cryptic tweet he sent out last week that had language similar to someone who about to leave their current position behind. Several
This month the SEC also announced it will sue Uniswap & MetaMask, the DOJ shut down a crypto mixer, and more scrutiny is coming in regards to what is classified as a broker dealer or a security. The FBI also came out to warn Americans of using unlicensed or verified crypto payment systems:
"A few simple steps can prevent unintentional use of non-compliant services," the FBI wrote in the release. "For example, avoid cryptocurrency money transmitting services that do not collect know your customer (KYC) information from customers when required."
There is a trend on the regulatory front to pay attention to and that is that crypto is becoming more and more scrutinized as adoption grows. I would be remiss to ignore the chances of a large regulatory related dump but past that I do think it is the time to sit on your hands and outlast those who have weak wet paper hands.
Higher.
Geopolitics & News
We touched on it earlier this week but the widespread protests and student sit ins surrounding the Israel/Palestine conflict are spreading across the nation rapidly.
University Southern California has just announced that it will be canceling its main stage graduation ceremony that is traditionally attended by 65,000 people due amid ongoing campus unrest and safety concerns (Rawalerts).
President Biden topped his list of gaffes this week when he said 'Four more years. Pause”, as he read from a teleprompter in a recent speech.
All in all expect news coverage to start shifting from global conflicts to domestic issues as more and more unrest begins ahead of the upcoming election and summer.
Nearly half of Democrats would support former President Trump’s plan for mass deportations of all undocumented immigrants during his second presidential term, according to a new Axios/Harris poll.
The USDA has issued various transport restrictions on dairy farmers after the bird flu was found at over 30 separate locations across the nation
China has reportedly warned Antony Blinken that the US must choose between ‘co-operation or confrontation’ (Financial Times).
The total fertility rate fell to 1.62 births per woman in 2023, a 2% decline from a year earlier, federal data released on Thursday indicated
The FCC announced this week they have restored Net Neutrality, saying: “Internet service providers will again be prohibited from blocking, throttling, or engaging in paid prioritization of lawful content”
The Ukraine agriculture minister offered his resignation amid a corruption probe: Ukrainian parliament
ByteDance is exploring selling TikTok’s U.S. business without the algorithm
US Security Issues
Alongside Columbia and NYU other campuses have seen sizeable demonstrations and sit ins begin including USC, University of Indiana, George Washington University, Emory University, and the University of Texas Austin. Texas mobilized the state troopers with riot gear to intervene.
The video below from @Megatron_ron on Twitter shows students at UT Texas being detained.
An estimated 54 people have been locked up for charges such as criminal trespassing and obstruction at UT Austin and cops fired rubber bullets at protestors at Emory. Noelle McAfee, theChair of the Philosophy Department at Emory University was detained.
Just this afternoon Pro Palestinian protestors stormed the Fashion Institute of Technology in NYC to begin protests.
A good reminder — I know not everyone enjoys my “prepping” or “doomer” posts that help talk through what to have and think about for worst case scenarios but given the current climate, it’s worth repeating.
Social unrest and riots are one of the most common disturbances or events you are likely to encounter. As we saw in the summer of love in 2020/2021 it takes only a single event to spark widespread rioting/looting/violent demonstrations.
Some things I take into consideration when I am in an urban environment like New York City includes:
Worst case re routing options (if roads are blocked or subway/transit stations clogged, how do I get where I need to go)
Dressing down slightly. Pre Covid I use to rock french collared/nicer shirts, suits, shiny bit loafers, nice watches, etc. Nowadays I try to be more low key - with grey, blue, or darker quarter zips, pants, and running/trail shoes if I am commuting. I also keep a hat, sunglasses, and even a balaclava type cloth mask in the event I need to blend into a crowd, get past a riot, or obscure my identity in a crowd. Sounds silly but you’ll hear many experts on this topic encourage this, including former military/intelligence operators used to operating in adverse environments. If a crowd of one hundred masked protestors have clogged Park or Madison Avenue do you think it’s a great idea to walk out in your 3 piece suit and tie? Bad look considering economic gaps, anti capitalist movements, and tendencies to target “outsiders”.
When you can avoiding disruptive areas or trying to detect when they are building is always the wisest option
Opinions likely diverge on this topic and I do see the point of view folks have about the US government cracking down on these protests, but it’s fair to say that the gatherings have become borderline disruptive, with officers being assaulted, cussed at, and operations on campus including final exams, being disrupted entirely. What’s more disturbing is the pro Hamas protestors who are chanting violent phrases that condone violence and action against Israel and Jews.
You cannot deny at this point that the US education system has produced systematic rot in the youth centered around anti capitalist, anti imperialist, and anti US ideas and rhetoric. You will frequently hear those who get detained, tased, or roughed up cry out with a “oh my god!” or “you can’t do this”.
This ties back to some of the themes I discussed earlier this week around action/reaction and force in the world. These young people do not know true conflict. They exist in an entitled soft little bubble where there are no consequences for actions.
Still to play Devil’s Advocate — it’s interesting to see the country crack down hard on Anti War protests while they had no issue letting BLM/Antifa burn the country for months and months as TheRealFly pointed out on Twitter.
In the video above you can see the mayor of San Jose California deal with an aggressive heckler who stumbled into his interview. The reaction by everyone, including the security guard that got his ass kicked is pretty typical for blue zones like California. Everyone is at a loss for what to do. They stumble around like buffoons and scramble to call the police all while the security guard is at risk.
This brazen behavior is increasing across the country and it’s not super surprising considering there are no hard repercussions for those who engage in it.
Russian & Chinese Subversion
As we approach the US Election in November it will be more likely we see increased subversion efforts by China and Russia within the United States. There is much for them gain, especially on the cyber front by tampering with election operations, targeting critical infrastructure, and working through apps like Tik Tok to impress narratives among the youth in the USA.
Russian hackers claiming to be backed by the Kremlin are believed to have remotely accessed a Texas town's water tower. The suspected hack in the Texas Panhandle town in January would be the first-ever disruption of a US drinking water system by Russia, after Iran and China carried out similar attacks.
The hack in Muleshoe, a community of about 5,000 not far from the New Mexico border, led to the tower overflowing with thousands of gallons for almost an hour, leading to a state of emergency to be declared (DailyMail). The group posted a video on Telegram of the town's water-control systems being manipulated, showing how they reset the controls.
I don’t need to explain how risky this is and how bad it could end up being if we saw it happen across the US on a larger scale. Paired with all of the instances of bridge issues, food factory fires, cyber probings, and extremist protests there’s a high chance that our enemies are funding and facilitating these developments in efforts to further divide and destabilize the US.
More of this will continue to occur — keep your eyes out in the coming weeks and months.
That’s it for today folks — make sure to look out for the 2024 Deal Sled Spring Review next week.
Have a great weekend and enjoy the weather if it’s warm!
Andy
Disclaimer - I am a former trader, enterprise sales rep, and current entrepreneur. Nothing I say should be considered formal financial advice - always do your own research and diligence before investing and ensure you have a good understanding of your personal risk tolerance.
Andy, have you read Ray Dalio’s book: Principles for dealing with the changing world order? Feel like that one would be appreciated by you.
Cheers
Jacob
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