Ripple & MSFT Beat Regulators, Inflation Cools, Demand Crash Coming
MSFT beat UK Regulators, Ripple rallies
By Terrence Hooi
Chief Investment Strategist
This Substack Post does not take into account nor does it provide any tax, legal or
investment advice or opinion regarding the specific investment objectives or
financial situation of any person.
1.) Is XRP Investable?
XRP had a momentous week, raising questions about the investment outlook.In an ongoing legal battle with the SEC since December 2020, Ripple Labs and XRP faced a crucial ruling from Judge Analisa Torres.
The SEC had accused Ripple of violating securities law through the sale of 14.6 billion XRP, which they deemed a "digital asset security."
However, Judge Torres ruled that XRP itself, as a digital asset, does not meet the criteria of a contract, transaction, or scheme, essential for the Howey Test, and is not an investment contract.
While Ripple's "institutional sales" were considered unregistered security offerings, other XRP transactions, such as programmatic sales, distribution as compensation, and sales by insiders Brad Garlinghouse and Chris Larsen, did not qualify as investment contracts.
Singular’s Take: The XRPL's technical progress reflects its age, with a lack of programmability hindering developer and user attraction, and despite efforts from Ripple Labs, the long-anticipated use case of XRP replacing traditional payment systems has not fully materialized.
Singular’s Action: As the implications of this ruling unfold, the investment thesis for XRP remains under scrutiny.
2.) Inflation Cools
Inflation showed a significant slowdown in June, offering optimistic signs for the Federal Reserve's efforts to control rapid price increases over the past 16 months. The Consumer Price Index (CPI) rose by 3 percent in the year through June, a decrease from the 4 percent increase recorded in May and a substantial drop from its peak of around 9 percent last summer.
The core index, which excludes food and fuel costs and is closely monitored by policymakers, performed even better than expected. It climbed 4.8 percent compared to the previous year, down from 5.3 percent in May, with economists forecasting a 5 percent increase. Moreover, on a monthly basis, it showed the slowest growth since August 2021.
Singular’s Take: These favorable inflation figures raise hopes that the central bank might consider halting interest rate hikes after its upcoming meeting this month.
3.) Demand Crash Coming
The U.S. inflation rate has been decreasing, but the initial problem was the high inflation reaching 9.1% in June 2022, which has since slowed to 4% by May 2023, benefiting stocks. However, money managers remain cautious, monitoring key inflation indicators and sectors affected by high inflation. Craig Studnicky, CEO of ISG World, warns that while inflation is currently somewhat under control, there is a possibility of it rising again, negatively impacting both the U.S. and global economy, emphasizing the importance of maintaining it within a range of 2% to 3%.
Singular’s Take: Nevertheless, certain market dynamics continue to influence capital flows, mainly revolving around interest rates. When there are anticipations of rate cuts materializing, investors begin factoring in a positive outlook for risk assets. One way to gauge this sentiment is by examining the implied overnight rate, which reveals what the fixed-income market is expecting in terms of rate cuts.
Bonus: MSFT Beat Regulators
On Wednesday premarket, Microsoft (MSFT) experienced an 8% gain after reporting Q3 earnings surpassing Wall Street's expectations. However, the UK's Competition & Markets Authority (CMA) intervened, stating that Microsoft's planned acquisition of Activision Blizzard (ATVI) could lead to excessive dominance in cloud gaming, potentially blocking the $69 billion deal. Despite this setback, MSFT stock still surged to $297.82 in premarket trading. The positive earnings results from Microsoft and Alphabet (GOOGL) led to a bullish sentiment in the futures market, with NASDAQ 100 futures rising by 0.6%, while the S&P 500 and Dow showed more cautious gains.