The Non-Disinflation Issue

Lots of interesting news this week where we address these important questions:

• Is the disinflation story done now?

• Can the Japanese yen recover?

• Are we finally about to get a Bitcoin ETF (OTC:GBTC)?

• How much trouble can we expect for Disney (NYSE:DIS)?

• Is the employment situation better than we thought last week?

Ready for the week? Let’s dive in:

• Oil Prices Are Going to Kill Disinflation:

Much of the market optimism this year has been related to excitement about disinflation. Disinflation is not a reduction in prices; but rather, a slowing in the rate of price increases. The primary reason for the decrease in inflation this year has been energy prices coming down from their 2022-highs. This week, Saudi Arabia and Russia both announced they will extend production cuts for months. As DKI predicted last year, the White House is having difficulty replenishing the strategic petroleum reserve after drawing it down to the lowest level in 40 years.

The White House said they’d refill at $70 oil. They didn’t do it.

• The Yen is Falling - Again:

Alone among the major central banks, the Bank of Japan has been trying to keep the yield on their 10-year government bond below 1%. They’ve succeeded, but at the cost of the currency. The yen is now falling towards 150 to the dollar, a huge problem for an island nation with few natural resources and a need to import energy.

If you don’t like inflation in the US, imagine seeing your currency do this.

• SEC Loses Important Bitcoin Lawsuit:

Last week, the SEC lost a lawsuit filed by Grayscale, the company that runs the Grayscale Bitcoin Trust ($GBTC). The SEC had rejected Grayscale’s application to convert the trust into an exchange traded fund (ETF). The Court found that since the SEC had approved an ETF based on Bitcoin futures, it was applying a different or arbitrary standard in not allowing a spot Bitcoin fund.

With or without an ETF, Bitcoin issuance is approximately 900 coins a day. That will decrease.

• Disney – Zero Shareholder Value in Almost 10 Years:

A content machine that’s declining in value. Graph from TIKR.

• Unemployment Down – More Mixed Data:

DKI has been pointing out the inconsistency in macro trends for almost a year now. This week, we saw initial jobless claims of 216k (seasonally adjusted) which was down from last week’s 230k. Total claims of 1.679MM were down by 40k. Labor costs are up more than 2%, but productivity is up even more at 3.5%. All of this was better than expectations.

Pretty big drop in the last few months.

This trend is positive as well with a still-low unemployment rate.

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