Domain Daily: Cracking the Whip

The Dose

  • Is Deflation on the Horizon?

  • Another Prime Day

  • Crypto Interest Still Going Strong

The Big Short's Burry Has a New Warning

Michael Burry, the hedge fund manager who shot to fame after Michael Lewis featured him in The Big Short, said interest rates might not stay elevated for long.

The Point: Ok, so we don't usually talk macroeconomics here, but Burry's point is worth mentioning. What Burry is highlighting is the so-called "bullwhip effect." You might not be familiar with that term, but it's a simple concept: the tail of a whip moves more than the handle when snapped. In this case, consumer demand is the handle, and retailers and their manufacturers are the tail end of the whip. Consumer demand spiked with the issuance of pandemic stimulus checks. In response, retailers like Walmart and Target aggressively hiked their orders with manufacturers. But once stimulus spending faded away, retailers were left with products they couldn't sell. As we've mentioned in prior editions of the Domain Daily, Walmart and Target are awash with excess inventory. Cutting prices would seem to be the logical way to rid themselves of that glut. Doing so would curtail inflation, which could then spur the Federal Reserve to cut interest rates. And with that, risk-on assets like stocks and cryptocurrencies could take flight.

Stock Market Basics

Amazon Poised to Announce a Fall Prime Day Event

CNBC reported that Amazon will hold a second Prime Day event during the fall.

The Point: Amazon's quarterly sales growth hit the skids in Q1. Revenue grew by just 7%, the lowest growth rate since 2001. And Q2 growth is expected to be even more anemic. The company's annual summer Prime Day has proven to be a hit. Last year, the event led to more than $11 billion in transactions in the U.S. alone. Amazon will see if holding a second sales extravaganza can help right the ship. But there's a reason for skepticism. Analysts are already concerned that the original event has lost momentum with consumers.

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Bank of America Says Clients Still Interested in Crypto

In a report published Tuesday, the bank wrote that "client engagement continues to grow and focus remains on the rapid development and disruptive nature of blockchain technology."

The Point: Bank of America held its "Web3 & Digital Assets Day" conference just last week. Many of the insights included in this report were gleaned from attendees at that event. Obviously, the crypto market is in a state of flux. But Bank of America's research shows that institutional investors aren't dismayed. Instead, some attendees said that recent events were "likely healthy for the ecosystem's development over the long term." Of course, there's always a risk that investors are "talking up their book," but any optimistic takes are worth noting right now.

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*The content team responsible for the above content uses primary and secondary sources they believe to be accurate, which includes but is not limited to Bloomberg, The Wall Street Journal, Financial Times, and CNBC, among others. 

*Domain Money Advisors, LLC, an investment adviser registered with the U.S. Securities and Exchange Commission and an affiliate of Domain Money, has (as of this writing) the following assets mentioned in this communication as part of its managed portfolios: AMZN