Dear Reader,
With the Federal Open Market Committee (FOMC) in meetings yesterday and today, it’s hard not to think about the decision concerning the Fed Funds rate that will be announced at 2 p.m. today.
By the time The Bleeding Edge is published, the news will be out already. If it’s a 75-basis point decision, I suspect the markets will rally into the close. A 100-basis point hike would likely have resulted in the opposite outcome.
More important than the hike itself is any forward guidance given for the rest of the year. We’re just seven weeks out until the mid-term elections, so whatever guidance is given will determine the tone for the markets through the end of the year.
I can’t remember a time when institutional capital was chomping more at the bit to get back into the market. But with the Fed appearing to be hell-bent to rectify its gross oversights and miscalculations about inflation last year, it makes it difficult for the funds to race back into the market if there’s a genuine threat of many more hikes to come.
Which got me thinking…. how much do we, as taxpayers, pay for the Federal Reserve to do its job? So I checked…
2022 Budget for the Federal Reserve (numbers in millions of $’s)
Source: www.federalreserve.gov
It’s an incredible number. The 2022 budget accounts for $6.246 billion of operating expenses. And that’s a significant increase from 2021, which came in at $5.9 billion. The employment numbers are equally surprising. The Federal Reserve system is budgeted to employ 24,447 people this year. Incredible. What is it exactly that they all do?
Better yet, there are almost 400 PhDs working at the Fed, and they have a very clear purpose. In the Fed’s own words:
Conducting the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices
Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
Knowing this, and knowing that nearly six billion was spent last year and $6.25 billion more will be spent this year, we have to wonder where all that money is going. After all, the U.S. market has low and declining labor force participation rates, and we most certainly do not have stable prices.
We were told that inflation was “transitory” while the Fed did nothing about it last year. And yet, here we are, implementing monetary policy that is destabilizing markets. And price volatility is out of control. To state the obvious, this is exactly the opposite of the Fed’s stated goals.
How did nearly 400 PhDs, the Board of Governors, and 11 Reserve Bank Presidents get it so wrong? This colossal mistake has come at not only the detriment of U.S. taxpayers, but also to the world – given the reserve currency status of the U.S. dollar. Maybe it really is time to end the Fed…
Cruise – a company we know well – just announced that it will launch autonomous ride-hailing services in Phoenix, AZ and Austin, TX. And they will be up and running within the next 90 days.
I have been tracking Cruise’s progress closely since General Motors (GM) bought the company back in 2016. Cruise has certainly come a long way since then.
If we remember, Cruise launched its first autonomous ride-hailing service in San Francisco back in February. One of its self-driving taxis even got pulled over by the police a few months after that. It was interesting watching the cops try to figure out what to do with a car that had no driver in it.
And now Cruise is expanding into both Phoenix and Austin. These are two very logical choices.
Phoenix is the same city in which Waymo’s service is up and running. The city’s road system is relatively simple for self-driving cars to navigate. And the regulatory environment is friendly as well.
For the sake of newer readers, I shared my experience riding in a self-driving Waymo in Phoenix a few months ago.
Austin is another great choice. It’s a major tech hub that’s been a hot test bed for self-driving cars. Now Cruise will bring a commercial service to the market.
And what’s so exciting is how fast this is all moving.
As I mentioned, Cruise plans to have autonomous ride-hailing operations running in both Phoenix and Austin by year-end. And we know that this is just a precursor to a much broader rollout next year.
So as we move into 2023, it will be common in several U.S. metro areas to see self-driving robotaxi services in operation. These services are going mainstream.
And it’s not just Cruise.
Tesla is a major player that’s been doing everything in-house. Waymo has been making great progress, as we mentioned. We’ve also talked about the rise of Motional – the joint venture between Hyundai and Aptiv.
And those are just the consumer-focused companies. As regular readers know, there is a long list of autonomous tech companies focused on the logistics and distribution markets as well. 2022 has already proven to be the year where the technology has crossed the barrier from testing to commercialization. 2023 will be all about scaling services to a larger number of markets and overcoming any regulatory issues that come into play.
Either way, we’re going to get used to seeing vehicles without anyone in the front seat…
We just saw another huge development around electric vehicle (EV) battery technology. Things are definitely heating up in this space. We’ve seen several developments in recent weeks.
Engineers at Harvard’s John A. Paulson School of Engineering and Applied Sciences have been doing a lot of research on solid-state battery technology in recent years. And they appear to have had a major breakthrough.
The team has developed an EV battery capable of 10,000 charging cycles over its lifetime. That means the battery can charge and discharge 10,000 times. What’s more, the battery can charge in a matter of minutes.
If this technology can be commercialized, it will be a game-changer.
For comparison, standard EV batteries today only last up to 3,000 cycles or so. For consumers who drive daily, that’s only enough to last three to five years – not long at all.
And if we remember, EV batteries are the most expensive component of an electric vehicle. That means EV owners today can expect to pay $10,000 to $20,000 every 3-5 years to replace their batteries.
Plus, today’s batteries take 30-45 minutes just to charge up to 80%. That’s a huge inconvenience for people traveling long distances, or for those who don’t have access to a 240 V charger at their home or apartment complex.
Add it all together, and the Harvard engineers may have developed a far superior option. And they are so confident in it, the team spun out a company to commercialize the technology. That startup is called Adden Energy.
It all comes down to some bleeding-edge research in materials science.
The team pioneered an approach that uses sulfide-based solid electrolytes as well as ceramic sulfide materials to improve a solid-state battery. The material design is the key to providing a longer lifespan with fast-charging capabilities.
That said, Adden Energy has proven that this technology works for small batteries roughly the size of our fist. The next step is to scale it up and demonstrate that the same approach works for larger EV-size batteries. That’s the next milestone.
So I’m very excited to see a brand-new entrant in the battery tech space making great progress. It’s exciting to watch as it’s not yet clear which materials and chemistries are going to result in the optimal solution for solid-state batteries. It’s one thing to prove something in a laboratory, and it’s another to commercialize at scale. The technology that can do that will prove to be the winner in this race.
We’ll wrap up today with something of an odd announcement in the digital asset space.
Fidelity Investments, Charles Schwab, and Citadel Investments just announced that they are teaming up to launch their own cryptocurrency exchange. They are calling it EDX Markets.
This is interesting for a few reasons.
For starters, these firms could help their retail and institutional clients invest in cryptocurrencies through the existing exchanges. Investor access isn’t an issue in the digital asset space.
Plus, Citadel’s founder has always been very critical of cryptocurrencies in the past. Why the sudden change of heart?
And then if we look at the current regulatory climate, the Securities and Exchange Commission (SEC) has been very antagonistic toward crypto under current chair Gary Gensler.
The SEC has gone after best-in-class, buttoned up, digital asset companies like Ripple and Coinbase. It claims that most cryptocurrencies out there are in fact securities that should fall under SEC oversight.
And by my count, the SEC has refused to approve a bitcoin spot exchange-traded fund (ETF) about 16 different times. That’s despite the fact that many of these ETFs were proposed by very well-respected firms in the ETF space. And it’s worth saying that a bitcoin spot ETF would be beneficial for retail investors.
So it strikes me as a very strange time for these three legacy financial institutions to decide to open a cryptocurrency exchange. Why take the risk into a market that is not looked well upon by the SEC? I’m very curious to see which assets they list… and whether there’s an overt collaboration with the SEC.
Each of these firms has a long-standing relationship with the SEC already. They’ve held securities licenses for years.
And that makes me suspicious.
Could this be an effort to bring down some of the digital asset-only companies that have been successful to date? Or is this part of a larger plan to lay the groundwork for what will ultimately become infrastructure for a digital U.S. dollar?
I don’t know. But I’ll be watching this story closely. This could very well be a precursor for sweeping changes happening behind the scenes.
Regards,
Jeff Brown
Editor, The Bleeding Edge
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
