The US can breathe a (tiny) sigh of relief | Coinbase has crypto problems |

Hi Finimizer, here's what you need to know for August 11th in 2:57 minutes.

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Today's big stories

  1. US inflation finally dropped off in July
  2. Stocks may be rallying, but there are three reasons you should still be wary about buying them – Read Now
  3. Crypto’s struggles continued to take their toll on Coinbase last quarter

In Today’s Little Victory, Inflation Comes Down Slightly

In Today’s Little Victory, Inflation Comes Down Slightly

What’s Going On Here?

US inflation fell by more than economists were expecting in July.

What Does This Mean?

It’s not often you’ll find investors celebrating US consumer prices that are 8.5% higher than they were the year before. But this was one of those rare occasions: July’s 8.5% was, after all, a marked slowdown from June’s 9.1% – not to mention better than economists had predicted. They were also expecting prices to jump 0.2% from June to July, but they were wrong on that front too: data showed there was no change at all, as a 5% drop-off in energy prices offset higher food and rent costs.

Why Should I Care?

For markets: Traders take this as a win.
The Federal Reserve has been trying hard to lower inflation, and this data could give the central bank faith that its efforts are starting to have the desired effect. Traders certainly seem to think so: they responded to the data by reducing the odds that the Fed would hike interest rates by 0.75 percentage points next month. That might be why the prices of risky assets like stocks and crypto went up following the update, and why the US dollar and bond yields went down.

The bigger picture: This probably isn’t a win.
Still, there are a couple of reasons the Fed probably won’t ease up. Firstly, it’s been vocal about the fact that it wants to see months of evidence that prices are coming down. More specifically, it needs “core inflation” – which strips out volatile energy and food prices – to consistently drop off, which definitely isn’t happening yet: core consumer prices rose 0.3% from June to July. Second of all, wages are still climbing at a historically fast pace. That might’ve got the Fed worried that we’re in a “wage-price spiral”, where a rising cost of living pushes up demand for higher salaries, leading to more disposable income and, ultimately, higher inflation.

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Analyst Take

Why You Should Be Cautious About Buying Stocks Right Now

Why You Should Be Cautious About Buying Stocks Right Now
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Stéphane Renevier, Analyst

Stocks have rallied with a vengeance over the past three weeks, and it’s not hard to see why.

Second-quarter company earnings ended up better than analysts were expecting, while investors have become more and more confident that US inflation has peaked.

But if you’re wondering if it’s time to start shouting about the arrival of a new bull market, there are three reasons you might want to hold off.

That’s today’s Insight: why you should be cautious about buying stocks.

Read or listen to the Insight here

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Coinbase Could Really Do With Crypto Picking Back Up

Coinbase Could Really Do With Crypto Picking Back Up

What’s Going On Here?

Coinbase reported worse-than-expected earnings late on Tuesday.

What Does This Mean?

Last quarter was another tough one for crypto, with prices down across the board and investor activity dropping precipitously. That caused the value of trades on Coinbase’s platform to more than halve from the same time last year, and brought the company’s overall revenue down by a worse-than-expected 61%. So it follows that the company reported a record $1.1 billion loss for the quarter, which was a far cry from the $1.6 billion profit of the same time last year. Investors initially sent its stock down 7%, which – on top of an 11% drop the day before – means its stock has now lost almost two-thirds of its value this year.

Why Should I Care?

Zooming in: Bitcoin bros turn scaredy cats.
Bitcoin represented 31% of the value of all trades on Coinbase’s platform last quarter – up 6 percentage points from the quarter before, and the highest it’s been since early 2021 (tweet this). That suggests investors have been seeking out the relatively secure embrace of the OG crypto. They seem to have abandoned their “to the moooon” approach too: Coinbase said its customers are increasingly lending out their coins to earn interest, or “staking” them in hopes of being rewarded with more in return.

The bigger picture: Coinbase hits upon a money-spinner. Sort of.
BlackRock – the world’s biggest asset manager – announced last week that it’ll be partnering with Coinbase to offer bitcoin trading to its institutional clients, which could significantly boost trading volume on Coinbase’s platform. But don’t be fooled: Coinbase charges the heavy-hitters much lower fees than proles like us, so it won’t necessarily lead to a proportionate increase in revenue.

You might also like: Should you cash in on Coinbase?

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💬 Quote of the day

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– Douglas William Jerrold (an English dramatist and writer)
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🌍 Finimize Live

🎉 Coming Up In The Next Week…

All events in UK time.

🤑 How To Protect Your Crypto Portfolio During A Recession: 5pm, August 15th
💰 The Secret To Making Money During High Inflation: 1pm, August 16th
💻 How To Spot The Best Tech Stocks: 6pm, August 16th

🥳 And After That…

🤯 Inflation Strategies For Savvy Investors: 12pm, August 18th
🏈 Crypto And The Sports Community: 5pm, August 23rd
👑 How To Invest In Gold On The Blockchain: 5pm, August 25th
😎 How To Spot The Next Ethereum Killer: 1pm, August 30th
🧬 How To Profit From Genomics: 5pm, August 30th
🎉 How To Build Wealth In Your 20s: 5pm, September 1st
💵 Building Crypto Wealth In A Bear Market: 12pm, September 20th

🎯 On Our Radar

  1. Plant-based burgers were meant to wane us off meat. Turns out we’re just eating both.
  2. Time for a new environment. Welcome to your space condo.
  3. Meet your new gardening inspiration. These animals could teach landscapers a thing or two.
  4. A CEO chimes in. Is there an inflation-proof business model?
  5. Find some rich friends. Then make them support the arts.
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