Plus, the Hottest Crypto Company in Town
Welcome to your Sunday digest…my weekly breakdown of the things we’re thinking about and talking about in the Global Intelligence world.
The only place to start this edition is with inflation.
Earlier this week, we got the March inflation reading….and boy howdy, it was a big ‘un.
Inflation climbed 8.5% last month to its highest level since the early days of Reagan’s presidency.
Real worker earnings fell by 0.8% over the same period, as this runaway inflation outstripped otherwise strong gains in pay levels.
Now, you might imagine that the markets reacted badly to this frankly horrifying inflation number.
In fact, the market’s initial reaction was positive… Here’s why:
In March, the so-called core Consumer Price Index rose 6.5% compared to March 2021. But it was only 0.3% higher than in February.
That sparked hope that inflation is easing and March may represent peak inflation.
Economists were all over the news channels praising this “slowing” inflation. You’re likely to see a lot of this sort of talk in the coming months…sharing the “good news” about “moderating” inflation.
I’m not so sure I buy into this cockamamie.
First of all, looking only at the core CPI is kind of magical thinking.
The core CPI excludes energy and food because they are seen as too volatile and thus give an inaccurate picture of inflation. The problem with that is food and energy prices are two of the very biggest concerns for American families.
What good is the moderation of inflation if the prices of gas and food are still soaring?
The second problem with this “good news” about inflation: Prices aren’t going to go back down.
Sure, it’s possible inflation may slow (though with energy and food prices still rising, I doubt it). However, it’s not going to retreat, so all that purchasing power you lost is gone and it’s not coming back.
I can tell from my own experiences here in Prague that any positive news about inflation is a head fake. My landlord just this week told me rent is going up because the cost of all the services for this apartment are going up. We went for coffee. My iced coffee is up 15%. That’s food inflation. But core inflation excludes prices increases like this.
And these price increases are not transitionary. The menu price is not gonna come back down when food inflation ebbs.
The reality is that “core inflation” is a game of Three Card Monty and the government hopes you don’t notice the ruse.
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Next up…this new crypto company is the hottest investment ticket in town.
In the most recent issue of our monthly publication, the Global Intelligence Letter, I told you about MoonPay…a company that allows you to purchase crypto using traditional methods like debit and credit cards.
MoonPay has been signing some big deals of late. The company is now working with OpenSea…the world’s leading marketplace for non-fungible tokens or NFTs. (NFTs are one-off, one-of-a-kind cryptos that can be used to represent ownership of digital assets, like virtual art.)
Using MoonPay, OpenSea users would be able to buy NFTs without having to go through the complicated process of setting up a third-party crypto wallet. They could simply enter their card details, no different than making a purchase through Amazon.
This seems like a good deal for OpenSea and MoonPay. It should bring a lot of new investors into the NFT space, and MoonPay will likely be taking a cut of each transaction, which should add up to quite a bit of cash.
Investors clearly think so…including a lot of A-list celebrities.
MoonPay recently raised $555 million in a new funding round that valued the company at $3.4 billion. Among those contributing their cash were Justin Bieber, Gwyneth Paltrow, Snoop Dogg, Ashton Kutcher, Drake, Eva Longoria, Jason Derulo, Kate Hudson, Paris Hilton, Matthew McConaughey, Questlove, and Shawn Mendes.
That’s a lot of money and star power for a company founded in just 2018.
Time will tell whether MoonPay is actually a good way to own NFTs. Already, a blockchain-based competitor on the Solana network is racking up big business offering NFT credit card purchases without the annoying KYC (know your customer) process MoonPay uses.
Moreover, certain NFTs award their owners crypto every month, and it’s unclear how or if MoonPay will support this kind of passive-income NFT play. (I’ll assess the company’s NFT buying and holding services at a future date and give you a report.)
But the one thing that’s certain is given MoonPay’s superstar backers, you’re going to be hearing a lot more about this company in the months ahead.
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We end this week with a pointless bugbear of mine…
Usually I reserve the digest for important financial news stories. But allow me a minor detour this week to talk about a completely unimportant story that makes me want to tear my hair out.
Netflix announced this week that it’s giving users the option to give a “double thumbs-up” on content. The new double thumbs-up feature is in addition to the existing buttons that allow you to give movies or TV series a single thumbs-up or thumbs-down.
There are two reasons this annoys me so.
First, the single thumbs-up or thumbs-down is an infuriating ranking system. It allows zero room for nuance. Everything must be boiled down to “good” or “bad”…as though those two adjectives can capture the depth and complexity of the human experience.
Yet, despite how terrible this system is, it exists right across the internet, on YouTube, Facebook, etc.
And a double thumbs-up is just an extension, rather than an improvement, on this system.
Which gets me to my second reason…metrics.
The reason companies use this system is not because it makes sense or users enjoy it. Rather it’s because it gives them the best metadata results.
This is the slippery slope that the big social media companies are gleefully sliding down.
Over time, these companies seem to completely forget about user experience and become obsessed with data.
That’s what led to the frankly horrible interface Facebook has today. And it’s why YouTube went from a useful, engaging platform to a maddening, non-stop ad-fest.
Here’s my question for Netflix: Why stop at a double thumbs-up?
Why not a triple thumbs-up, or a quadruple, or a quintuple? In fact, why not just go back at the five-star system you used to have? That actually worked in the first place. It’d give that move a double thumbs-up.
That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website.
