News Block: The Fed Hiked on Bad Data, Crypto Mom Signs Off, and a Sovereign Fund Trades Gold for Bitcoin

Natalie Brunell (0:00)

The Fed raised rates on a jobs report that has now been revised away, and the bond market is charging the government more than it has in nearly 25 years. This week, whether the Treasury's bond buybacks are actually working, why the SEC just lost its strongest voice on digital assets, and the move one of the world's most conservative investors just made with gold. I'm Natalie Brunell, and this is the News Block powered exclusively by Ledn.

A month ago, the jobs report came in so strong that the Fed felt safe raising interest rates. But last week, we found out that report was wrong. Now, first, the economy added just 29,000 jobs in September, when economists were expecting around 85,000. Unemployment ticked up, but the revisions are the real story, because August's big number got cut from 162,000 jobs down to 133,000, and July turned into an outright loss. So about 60,000 jobs that the Fed thought existed when it hiked were never really there. Now, the number that actually touches our lives, wages, grew 3% over the past year, which is the slowest pace since 2021, and that almost certainly trails inflation for the sixth month in a row. So in plain terms, your paycheck has been losing to your grocery bill since the spring, and the Fed just made your car loan and your credit card more expensive on top of it. So the Fed is stuck. Inflation says hike again, but the jobs market says don't. Traders pulled back their bets on a hike at the Fed's late October meeting, but the 10-year treasury yield already at a 24-year high went up on the day instead of down. And that's the part that should bother us. Weak jobs usually pull bond yields down, but these push them up. And Bitcoin told you how the market read it. It ran up near $87,000 on the jobs report and then settled back into the mid 80s as yields refused to budge. It's still up roughly 9% over the past month, but it's living in the same box as the Fed. There's a slowing economy and the cost of borrowing will not come down. All right, back in August, I walked you through the Treasury's plan to buy back its own long term bonds and why critics called it a backdoor way of holding down interest rates. That plan is now running at full size. On Thursday, the Treasury bought back up to $6 billion of its 10 to 20 year bonds. That's the second operation at that size and it's triple what these used to be. And the Treasury is of course replacing the long bonds that it buys with short term debt, which is exactly the swap that critics warned about. It's highly inflationary. And here's what that money bought. The 10 year yield is still above 5.2%, the highest in 24 years. And the average 30 year mortgage jumped again to nearly 7.3%.

So the government is spending billions of dollars to calm the bond market, but the bond market is not calming. Wall Street can see what this is. The head of global bonds at Prudentials Investment Arm, which is one of the biggest bond managers in the world, told CNBC the Treasury is trying to control the price level at the back end of the curve. That's a polite way of saying price management. The exact phrase Stan Druckenmiller used when he called the program a big mistake. The Treasury says it's about liquidity. You've had six weeks to watch it and you can decide which description fits. And here's what I keep coming back to. When the safest borrower on earth has to buy its own debt to hold down borrowing costs and they go up anyway, that's not a market problem, that is a confidence problem. The people who lend America money are demanding more in interest payments and no amount of financial engineering has changed their mind. And that is the world Bitcoin was built for. Ledn just introduced their lowest rates ever. The larger the loan, the lower the rate on all new loans, refinances and renewals. Your Bitcoin stays custodied, never lent out and you can repay any time with zero penalties. Get a quarter percentage point off your first loan at ledn.io.

Ever since Congress killed the Clarity Act, the regulators have been writing the rules themselves. And last week, the SEC wrote a big one. On Thursday, the agency proposed new custody rules for the professionals who manage your money, which in plain terms decides who's allowed to hold your Bitcoin when an advisor or a fund is investing for you. Advisors could hold digital assets themselves in some cases and state chartered trust companies would count as custodians. SEC Chairman Paul Atkins admitted the rules have not kept pace since Bitcoin arrived and said more proposals are coming. That makes three regulators acting since the Senate walked away from clarity. The SEC cleared tokenized stocks, the Fed wrote the stable coin rules, and now this. Bitwise's investment chief said last week that losing the bill actually got the industry faster wins. The catch is the same as always, what an agency writes and next administration can technically erase. Then the person who spent nearly nine years fighting for exactly these rules walked out the door. Hester Purce left the SEC on Friday. She's been a guest on the show, and if you followed Bitcoin for any length of time, you know why she mattered. She was appointed in 2018 and served through two chairman who sued the industry at every turn, and she dissented in writing over and over, including when the SEC kept refusing to approve a spot Bitcoin ETF. She pushed for written rules when nobody else inside the building would, which is how she earned the name Crypto Mom, and she ran the Crypto Task Force that produced most of what the agency has done this year. A week before she left, she posted her resignation letter with three words, T-7, and in it, she called the job the honor of my professional lifetime and spelled out her philosophy that a regulator's job is to protect people's freedom to make their own choices inside sensible guardrails. Her last speech two days before that was about privacy, arguing that regulators can catch criminals while collecting far less of your personal data. Nobody has been nominated to replace her yet, so the commission is now two people writing the rulebook for the entire industry, and the one voice that spent years defending this technology from the inside is unfortunately gone. So the rules are moving faster than they ever were, and the bench writing them just got shorter. We'll be sure to follow all the developments as a nomination is made. Wall Street spent the last week putting new numbers on Bitcoin, and one of them came from a place we didn't expect. Citigroup raised its 12-month target to $113,000 of Bitcoin as the ETFs took in more than $3 billion over nine straight days. And the quarter that just closed was Bitcoin's best in nearly two years, up more than 40%, beating both the NASDAQ and gold. But the number I want to talk about actually came from a survey. Bitwise interviewed 15 large institutions, pensions, endowments and sovereign wealth funds that manage money for whole countries. Not one of them sold Bitcoin during the 50% drop from last fall's record. Several of them bought more and one sovereign wealth fund said it paid for its Bitcoin by selling gold and foreign currency reserves. The fund was not named, so treat that as a signal rather than a headline. But sovereign wealth funds are the most conservative investors on earth and gold is what they've trusted for centuries. So at least one of them looked at a world where the US pays 5% to borrow and still can't hold its own bond market and decided the better hedge was the one nobody could print. Now, two dates to circle, the Fed decides on rates October 28th and the next jobs report lands November 6th. That's it for this week's News Block powered exclusively by Ledn. Until next week, keep stacking.