Hello everyone, today let's talk about the exciting U.S. stock market and the latest antics of Trump.
The U.S. stock market is really like a rocket. The S&P 500 Index is soaring, staying above 6000 points for five consecutive days! This V-shaped reversal is about to reach its peak, just waiting to break through 6147 points, refresh its historical record, and then ride the momentum to form a new trend.
However, around 6000 points, you need to be careful, as there might be a major shakeup. But as long as there isn't a big bearish candlestick, we'll maintain a bullish attitude.
The Nasdaq isn't doing much better, having also entered the previous range-bound zone. Before 20000 points, it failed to break through for a long time and even formed a top, then experienced a major drop due to tariff news. Now, the V-shaped reversal is back, but it's unlikely to pass through this level easily. I think it's likely to suddenly drop, then bounce back, with a fake breakout during the day and a lower shadow candlestick. In short, only by breaking through 20204 points and refreshing the historical high can people feel at ease.
Trump Lashes Out at Powell: You're a "Nomskall"!
Trump really can't stay idle. Today, he started scolding Powell again, and gave him a new nickname, "Nomskall," which translates to "fool." Trump criticized the Federal Reserve Chairman for being a "fish head" and demanded that he cut interest rates immediately.
"Nomskall" directly translates to fool, an obstinate and dull mind. I think calling him a "fish head" better reflects that contempt and sarcasm. Trump almost pointed his finger and said, "Powell, you 'fish head,' prices are falling, why won't you cut interest rates?"
The tariffs really didn't have much impact on the May CPI, the price increase was lower than expected, and also lower than the previous value. The PPI (Producer Price Index) released today, as one of the inflation data points, was also lower than expected. In May, the core PPI excluding food and energy rose 0.1% month-on-month, compared to a revised decline of 0.2% last month, lower than the market's expected increase of 0.3%.
Two of the three major inflation data points, CPI, PPI, and PCE, are now lower than expected, and the PCE in half a month is likely to be the same result. No wonder Trump wants to scold Powell, he's just frustrated!
However, the Federal Reserve Chairman has many factors to consider, not just cutting interest rates because prices aren't rising. Once there is an expectation of interest rate cuts, the dollar will depreciate. The dollar index has broken down, falling below the long-term support level.
This chart is the trend chart of the dollar index. The dollar index is calculated from the euro, yen, pound, etc., according to different weights, with the euro accounting for the largest proportion, accounting for 57.6%. The RMB-USD exchange rate, which Chinese people are more concerned about, is not in the dollar index weight.
The 100-point mark of the dollar index is a major long-term support level, and it has completely broken down recently. In the Mar-a-Lago agreement circulating in the market, the Trump administration's tendency is a weak dollar policy, and he wants the dollar to depreciate.
Dollar depreciation doesn't have much impact on American investors, but it is a potential cost for investors whose base currency is not the dollar. For example, if Taiwanese people invest in U.S. stocks, the dollar depreciates. After a year of investment, U.S. stocks may have earned 10%, but the dollar depreciates and the Taiwan dollar appreciates by 4%. When converted to New Taiwan dollars, it's found that it didn't earn 10% when expressed in Taiwan dollars, but only earned 6%.
After the dollar depreciation trend is formed, the attractiveness of U.S. stocks to global funds slightly decreases because the expected return has to be reduced by the exchange rate loss. Some funds warn that if a super dovish central bank governor takes office next year, the dollar may depreciate by 10%.
Trump occasionally publicly scolds Powell, and the scolding becomes more and more unpleasant. He also plans to nominate the next Federal Reserve Chairman in advance, with the aim of forcing Powell to cut interest rates quickly.
Next Wednesday, the June meeting will release policy decisions under the President's public pressure. The probability of maintaining interest rates unchanged is expected to be as high as 96.9%, and the market does not think that the "fish head" will change his mind and will continue to be hawkish.
It can be expected that after Powell expires and steps down next year, Trump will nominate a Federal Reserve Chairman who is in line with his wishes. This person may be Warsh, but there are rumors this week that Treasury Secretary Mnuchin may also be nominated as the next Federal Reserve Chairman.
I think Mnuchin has a relatively high emotional intelligence. He doesn't directly oppose Trump, but can influence Trump's decisions. For example, after the reciprocal tariffs came out and caused a shock, Mnuchin advocated suspending the tariffs to win the initiative in negotiations. In the two months of negotiations, Mnuchin was also at the forefront.
Trade War Relief? Mnuchin Finds a Way Out for Trump
Today, Mnuchin is again finding a way out for Trump. With the 90-day suspension period set to end on the 9th of next month, will high tariffs be imposed on the world again?
So, Mnuchin is now saying that as long as trading partners are negotiating in good faith, the suspension period can be extended. The United States now has 18 important trading partners, and those countries like the EU that are negotiating in good faith, the United States will extend the suspension period.
This proposal will defuse the risk of "Liberation Day 2.0." Another "Liberation Day" would be great for U.S. stocks to have another major drop. I believe that with the experience of the last V-shaped reversal, many people are determined to buy the dip in the next crash.
However, Mnuchin is trying to defuse this risk by extending the 90-day suspension period further. This proposal can balance the pressure between Trump and his negotiating opponents.
If the trade war eases, the probability of another sharp drop in U.S. stocks will be greatly reduced. After a period of rising, U.S. stocks have accumulated pressure for a correction, and a trigger is needed to make the adjustment happen. Large-scale corrections are not without reason. Major crashes in history have major events happening, such as wars, terrorist attacks, epidemics, major bank failures, trade wars, etc.
U.S. stocks just experienced a severe panic drop in April, and it may take a relatively long time before such a large turbulence occurs again.
The U.S. is Legislating Stablecoins!
The United States is legislating stablecoins, which is a big deal for cryptocurrencies. It will require issuing institutions to hold 100% asset reserves. To issue stablecoins, stablecoin companies must hold US Treasuries or generally equivalent assets in full.
Originally, stablecoins might challenge the hegemony of the US dollar, but the government found that this could strengthen the use of the dollar, because stablecoins are anchored to the dollar one-to-one. Stablecoins are dollar tokens, and stablecoin companies must hold dollars and dollar assets.
In the future, there is hope to become the third largest investor in U.S. bonds. Mnuchin believes that stablecoin legislation will help expand the global use of the U.S. dollar. Stablecoins will reach a market value of 2 trillion US dollars and add an additional 1 trillion US dollars of treasury funding sources in 2030. What the Treasury Secretary likes to see most is major investors investing in US bonds, because the US debt will only snowball faster and faster.
For stablecoin companies, the only formally listed one is Circle, which is the issuer of USDC. If stablecoins are used for international remittances or as payment tools, the cost is far lower than bank remittances, and the transfer speed is instantaneous, which is a huge challenge to the traditional off-balance-sheet business of banks.
Of course, with regulatory legislation, large and small banks may also follow up on stablecoin business. For Circle, you may find that the cost of its main business is extremely high when you look at its statements, because Circle's main revenue is the interest from holding reserve assets, and the expense is the percentage paid to the cryptocurrency exchange platform. In order to use USDC on the exchange, Circle has to give most of its income to the exchange, such as Coinbase.
But if stablecoins reach a scale of 2 trillion US dollars as Mnuchin described in the future, Circle will be extremely valuable for investment. I think that stablecoins may benchmark Mastercard or VISA in the future and become payment and settlement channels.
| Company | Market Value (USD) |
|---|---|
| Mastercard | 530 Billion |
| VISA | 720 Billion |
Of course, to reach such a large scale, people need to widely use stablecoins in payment and settlement. For example, pay with USDC to buy a fish at Walmart. If such a scenario is realized, Circle will definitely be worth more than the current 23.7 billion, but more than 200 billion.
After a new stock IPO, the market will experience a process of big ups and downs, because its pricing is not yet perfect and is still full of controversy. I am not preparing to rush to buy at a high price, but will buy it when the turnover rate and stock price are relatively low and no one cares about it. The current stock price has increased by 240% compared to the issue price of 31 yuan. I will wait for a good price to appear.
Trump's "$5 Million American Gold Card" is Here!
Trump's "$5 Million American Gold Card" has new news today. Trump wrote on Truth Social: "The 5 Million Gold Card Immigration Program is coming! Since the website opened last night, more than 15,000 people have registered to join the waiting list."
This rich man immigration gold card called "Trump Card" opened a webpage. At first, I thought it was a scam, but the top wrote it was the U.S. government's official website, and it was also the link in Trump's post, so it doesn't seem fake.
Trump once said that if he could sell 10 million gold cards, he could use 50 trillion to pay off US debt. Are there tens of millions of people with ten million dollars in assets in the world? So much money makes me feel inferior.
So, I specifically asked ChatGPT. To spend 5 million to buy a gold card, you must have at least 10 million on hand, otherwise how can you live in the United States?
I asked ChatGPT where are the people in the world with 10 million US dollars, and how many people are there? It told me that as of the end of last year, there were 2.34 million high-net-worth individuals with net assets exceeding 10 million US dollars worldwide, mainly distributed in the United States, China, Japan, India, and Germany. These five countries accounted for 71% of the world's wealthy people. Among them, the United States alone has 905,000 people, accounting for 38.6% of the world, and China has 472,000 people, accounting for 20% of the world.
Deducting those who are already in the United States, there are only more than 1 million wealthy people in the world with assets exceeding 10 million US dollars. Even if you scour the wealthy people all over the world, you can't solve the American debt problem!
However, congratulations to overseas Chinese, the value of becoming a U.S. citizen will be greatly increased because of this gold card, and the identity has increased in price!
Okay, that's all for today. See you next time!