3 Takeaways From GDP
There's a lot to take in when looking at the GDP data ... but there are three things you NEED to know!
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Crypto Made ✨ Simple ✨: What Can You Do With DeFi?
My last writeup focused on getting your crypto wallet connected to decentralized finance (DeFi) products.
Over the next several articles, I want to take it a step further by explaining some of the things you can do in the DeFi world.
1 App That Makes Crypto Easy
Today, I’ll be going over an app called Zerion, which helps with tracking your investments.
One of the most fundamental things that you can do in DeFi is track your activity. After you make a crypto wallet, it’s helpful to have all your buys, sells, and transfers all in the same place.
There are lots of services out there that track your wallet activity, but the one I use is Zerion. When you go to its website, you’ll be prompted to connect your wallet, and your screen should look something like this:
After you connect your wallet, you’ll be able to see your portfolio balance, tokens, NFTs, and trading history. Zerion also has an interesting feature called “Explore,” which is in the menu on the left side of your screen:
This lets you see all sorts of things that are going on in the world of crypto. But one of the most useful parts is that it breaks down tokens by “sector” like this:
Overall, Zerion is not only a great resource for tracking the activity of your DeFi wallet — it’s also a great resource for tracking the overall market and finding new and trending investments opportunities.
Unfortunately, we had some technical difficulties with Substack this week, so we’re combining this newsletter with the one originally scheduled for Wednesday. But don’t worry! We made sure that our content is fresh and updated!
Next Wednesday, I’ll mostly be focusing on earnings reports, primarily those of our 21 Disruptors Index. But for now, watch this video for a quick update or read below for a deep dive:
1 Macro Metric You Can’t Miss 👀
On Monday, the Purchasing Managers Index (PMI) data for October was released. This is one of the most important measures of the economy there is, as it tracks business activity across the country.
More specifically, it looks at things like new orders, input and output costs (inflation), current employment — as well as future employment plans — and backlogs of work.
For reference, a PMI below 50 means there’s overall contraction. When it’s above 50, it means there’s expansion.
Overall, PMI came in at 47.3 for October, its fourth month in a row below 50:
PMI is split into two main parts: manufacturing and services.
Manufacturing PMI was 49.9, its first month below 50 since July 2020. Services PMI was also in contraction with a reading of 46.6.
Considering that services are still the main source of jobs and inflation, this is the more important area to focus on for now.
In my Substack a few weeks ago, I said the key sector to watch in the jobs market is leisure and hospitality (L&H).
That’s because it’s the most cyclical sector — and when that starts to turn, it could be a warning sign for the broader jobs market, which is the only thing holding up the economy right now.
So, what does the PMI services data have to do with L&H?
Jobs in the L&H sector are primarily services jobs, and they benefit the most when discretionary spending is higher. As I’ve been saying, discretionary spending right now is extremely fragile, as people are using credit cards more than ever after inflation has depleted savings.
Now that services PMI has been in contraction mode for four straight months, it could be a warning sign that discretionary business activity is finally starting to slow, which we also saw in the latest L&H job openings data.
GDP Update
Due to some technical issues with Substack on Wednesday, we weren’t able to get my newsletter out before GDP data was released.
However, one of the things I talked about (you can still see it on YouTube here) was the fact that inventory growth has been slowing significantly due to all the over-ordering from companies in response to COVID-19 lockdowns.
In total, Q3 GDP was up by 2.6%, compared to overall estimates of 2.4%. Three areas that I think are worth addressing are inventories, net exports, and consumption.
Inventory growth did slow down once again, but it didn’t end up having a huge impact on GDP. Overall, it reduced Q3 GDP by 0.7%.
The real difference maker this time around was net exports, or in other words, the amount we export minus the amount we import.
Because the dollar has gone up in value against other currencies so much this year, our imports during the first half of the year have been extremely strong.
In total, the U.S. imported over $1.97 trillion worth of goods and services in the first six months, versus $1.43 trillion in exports. That’s about a $90 billion difference per month.
In Q3 however, the tides began to turn, with $997 billion in imports versus $779 billion in exports — a difference of just $72.5 billion per month.
Overall, that shift added 2.77% to Q3 GDP. To find the last time net exports added this much to GDP, you have to go all the way back to Q3 of 1980:
The last thing I want to touch on with GDP is consumption. This is the largest and most important part of U.S. GDP, accounting for about 70%. Total consumption was up about 0.35% from Q2, and it added 0.97% to total GDP.
Both of those numbers are lower than average, but they’re not anything special.
One other thing to point out is that services consumption growth far exceeded goods consumption.
In total, services added 1.24% to GDP, while goods actually subtracted 0.28%.
Demand for goods has been weak for over a year now, as this was its fourth negative GDP contribution in the past five quarters. Even though the services economy is contracting as we saw in the PMI data, it’s still relatively strong.
That’s all for now! But if you would like to keep the conversation going, consider subscribing to one of our tiers for continued stock and crypto coverage and guidance!
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