Dawn Report – May 12, 2022

It’s rare that you see the collapse of an entire market sector.

It’s even rarer when you are warned why it is going to happen beforehand.

All the way back on July 12, 2021, Dr. Kent Moors said that problems with “stablecoins” could cause the next asset crisis.

He wrote:

Since it is tied to the dollar, tether should have a value that remains at $1. However, that has not always been the case, prompting some panic upon occasion among investors.

Sound familiar? That’s exactly what’s happening now. Of course, the exact coin is different. It’s TerraUSD (UST). This stablecoin is supposed to be worth $1.00. That’s the whole point of a stablecoin. Now, it is less than $0.30.

It’s very similar to what happened with the real estate crisis not long ago, when the financialization of assets outstripped what was actually happening in the market. Then, you had huge amounts of money backing “toxic assets” that were bound to collapse.

Here, you have stablecoins that are needed for cryptocurrency transactions that may not actually be stable. They don’t have the assets to keep the stablecoin pegged to a $1.00 value.

Remember “Margin Call?” Same principle, just with crypto.

As Dr. Moors wrote then:

Only this time, it will play out in a still unregulated market yet serve as a transaction base for a widening collateralization of other dollar-denominated assets…

Not the development to put much trust into the securitizing of assets. Unless, of course, you really enjoyed that subprime mess.

Now, Dr. Moors was writing about Tether, a separate stablecoin. Yet the same principle remains. Does Tether have sufficient dollar reserves to maintain the 1:1 peg?

The very future of cryptocurrency may depend upon the answer. And the federal government now has crypto in its sights. The “unregulated market” won’t stay unregulated much longer.

“Digital assets may present risks to the financial system and increased and coordinated regulatory attention is necessary,” said Treasury Secretary Janet Yellen earlier this week.

That may sound bad, but regulation could end up strengthening crypto in the long run.

Capital is a coward, as the saying goes, and more than anything else, what many investors are looking for is stability.

I would simply say that permanence is always an illusion. The ground is always shifting.

Your best bet is to have cutting edge intelligence that will help you see the storms before you leave your safe harbor.

That’s what we’re here for.

Keep moving,

Find out the answers to the questions that traders want to know right now. What defines a bear market, and how do you trade it? How do you handle binary events like Fed announcements?

And is there a way to know how much information is already priced in?

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WORD ON THE STREET

Inflation Tops Expectation, Bitcoin Bombs, Saudis Take Bite Out Of AAPL

“What Year Is It?!?” – Cutting edge technology? 5G? Metaverse? No, the biggest company in the world is an old fashioned oil company based in a country with a royal family that serves as something more than a figurehead. Saudi Aramco is the biggest company in the world, surpassing Apple in market cap as tech continued to plunge. Aramco is now worth an estimated $2.43 trillion – while AAPL fell more than 5% yesterday.
Not Sure This Is “The Dip” Yet… – Are those dreams about volcano-powered cryptocurrency supercities going up in smoke? While countries like El Salvador and cities like Miami have gone all-in on cryptocurrency, the drama surrounding stablecoins is leading to a plunge in valuation. BTC fell to below $27,000 while ETH is down almost 25% to just about $1,800. So much for diamond hands.

Inflation Worse Than Expected: Inflation in April beat estimates – and that is really not good news. Prices were up by 8.3% in April and core inflation (meaning no food or energy) was up by 6.2%. Experts were hoping that the April report would show inflation was at least cooling off – and while it was a slightly lower pace than March, we’re still nearing 40 year highs. That means more rate hikes and more pressure on the market.
Manchin Sinks Dems Again – West Virginia Senator Joe Manchin destroyed Democrats’ hopes of keeping abortion available nationwide even if the Supreme Court overturns Roe v. Wade. In an otherwise strict party-line vote, Manchin was the lone defector to the GOP side of aisle, dealing the majority a 49 to 51 defeat. The West Virginia maverick’s popularity has increased in his state even as his party has faltered, giving Majority Leader Chuck Schumer little leverage over him.

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HOT SPOTS: What’s Going on in Geopolitics

Russia Moves To Annex Kherson – Russia has cobbled together enough local “collaborators” (Ukrainian president Volodymyr Zelenskyy’s term) in the Ukrainian territory of Kherson for the region to “request” joining Russia. The move comes even as Ukrainian forces are launching successful counter-attacks near the northeastern city of Kharkiv, potentially jeopardizing the Russian army’s supply lines.
Russian Fleet Heads Into Black Sea – According to British intelligence, Russia has assembled a fleet of about 20 ships and submarines for action in the Black Sea that has the potential to strike at coastal targets. While Ukraine advances in the northeast, Russia is looking to press its advantage in the south, with repeated attacks against the key city of Odesa.
China Nears Deal In Solomon Islands – China has all but concluded a new security arrangement with the Solomon Islands that could potentially give China a new base for its ships and soldiers. Solomon Islands Prime Minister Manasseh Sogavare blasted American and Australian concerns about the agreement as “insulting.” A leaked draft reportedly allows Chinese troops and police “to assist in maintaining social order,” among other arrangements.

CUTTING EDGE: What‘s Happening In Tech

Disney Threatens To Dethrone Netflix – Disney (DIS) is an American institution, not something you think of as on the cutting edge. But with about 138 million subscribers to Disney Plus, it is threatening to bump off Netflix (NFLX) as the biggest subscription video service in the world. Netflix still has a commanding lead with about 221 million subscribers – but reported recently that its overall membership declined. It’s a situation that company hasn’t had to face since the days of competing with Blockbuster.
Disney Threatens To Dethrone Netflix – Disney (DIS) is an American institution, not something you think of as on the cutting edge. But with about 138 million subscribers to Disney Plus, it is threatening to bump off Netflix (NFLX) as the biggest subscription video service in the world. Netflix still has a commanding lead with about 221 million subscribers – but reported recently that its overall membership declined. It’s a situation that company hasn’t had to face since the days of competing with Blockbuster.
Disney Threatens To Dethrone Netflix – Disney (DIS) is an American institution, not something you think of as on the cutting edge. But with about 138 million subscribers to Disney Plus, it is threatening to bump off Netflix (NFLX) as the biggest subscription video service in the world. Netflix still has a commanding lead with about 221 million subscribers – but reported recently that its overall membership declined. It’s a situation that company hasn’t had to face since the days of competing with Blockbuster).

Citadel Has Also Denied Any Role In UST’s Collapse
(Citadel Center, photo attribution J: Crocker)

FOR YOUR CONSIDERATION

“Putin’s approval rating is about 80 percent, with some figures above that. Now, these are Russian polls and the figures reflect a tight propaganda narrative with which the Kremlin controls Russian media. But the polling is statistically sound and seems to show an accurate public view.”

You keep reading hopeful reports in Western newspapers and even statements from Western politicians that Vladimir Putin is on the way out.

He’s distrusted by his inner circle, fearful of a coup, utterly paranoid… at least that’s what they tell you.

But what if the West is deluding itself? What if President Vladimir Putin is actually quite popular among the Russian people?

And if that’s true, how does he maintain his popularity in the face of a military debacle?

Dr. Kent Moors analyzes the first major public relations crisis in President Putin’s reign. In this Spy Tale, learn how the Man That Would Be Czar developed the techniques that would allow him to maintain his iron grip

How Putin Learned To Stay Popular

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