No Shirt, No Shoes… No Cash?

• Would you boycott businesses that refuse physical cash?
• Jobs Friday: Mr. Market might be jumping the gun
• Rickards defies the consensus: Fed raises this month!
• Bitcoin’s BIG JUMP after BIG NEWS… Oh, never mind
• Elon Musk and French wine in the Friday mailbag

Is No-Cash a Deal-Killer For You?

One of the oldest fast-food chains in the country is taking an ominous leap…

If you’re not from the South, maybe you’ve never heard of Krystal — purveyors of small square hamburgers, founded in 1932. There’s a resemblance to White Castle in the Midwest (which came earlier), but they’re different sandwiches and different companies.

We don’t see any evidence that the entire chain has gone cashless — no press release, no news articles.

But there’s definitely chatter — and photographic proof — on social media and old-fashioned message boards. We just don’t know how extensive the move is across Krystal’s 360 locations in nine states.

Meanwhile, the parent company of three much bigger fast-food chains is moving in the direction of cashless — even if it won’t say so directly.

The obnoxiously named Yum! Brands — publicly traded as YUM — was spun out of PepsiCo in 1997. Its three big names are Pizza Hut, Taco Bell and KFC.

“Louisville, Ky.-based Yum wants 100% of its global system sales at some point to be driven digitally, with electronic means initiating at least one part of a customer transaction,” reports The Wall Street Journal — citing CFO Chris Turner during the company’s earnings call on Aug. 2.

“What might a digitally enabled dining experience look like? It may include more customers placing orders through a Yum website or mobile app, through a third-party aggregator, or at a kiosk in a restaurant. It could also involve using artificial intelligence to take drive-thru orders, which the company is in the early stages of testing, Turner said in an interview with CFO Journal…

“A fully digital ordering system is particularly appealing to Yum because past shifts toward digital have led to larger order sizes, more orders from recurring customers and greater opportunities for marketing to customers, Turner said.”

Bigger orders? More frequent orders?

Curiously, the words “cash” and “payment” are nowhere to be found in a transcript of the call.

And then there’s that curious passage in the Journal about “electronic means initiating at least one part of a customer transaction.” Nothing about completing a customer transaction.

A lazy editor working for Nexstar Media Group jumped to conclusions and in short order, headlines like “Taco Bell Going Cashless” proliferated on the websites of Nexstar’s many local TV stations and The Hill newspaper. Just a little premature from where we sit.

Obviously if you’re ordering your chalupa on a mobile app or through a kiosk, it’s going to make more sense to pay via digital means.

And maybe that’s the direction it’s all going — not because cashless is the goal as much as getting rid of human help to take your order is the goal.

In any event, it’s understandable if your antennae are on alert — seeing as you’re likely familiar with Jim Rickards’ “Biden Bucks” thesis and the push to implement a central bank digital currency while forbidding physical cash.

And so we conclude this bullet where it began: If a business you patronize adopts a no-cash policy, will you walk away? Send us your answer here and we’ll share the best of the bunch next week.

Jobs Friday: Is Mr. Market Jumping the Gun?

Wall Street is ending the week in rally mode — “as traders bet the Fed will hold rates steady following jobless rate jump,” says CNBC.

Hmmm… It being the first Friday of the month, the government is regaling us with the August job numbers. The wonks at the Bureau of Labor Statistics conjured 187,000 new jobs for the month — a healthy job market, nothing spectacular. The June and July figures were revised downward — and that’s on top of downward revisions to the rest of the 2023 data a couple of weeks ago.

But what’s really stoking the “Fed won’t raise rates this month” narrative is the fact the official unemployment rate jumped from 3.5% to 3.8%.

Hold on, though. Two factors appear to be skewing that number…

• The bankruptcy of the Yellow truck line. Presumably most of those truckers are jumping to other employers since there’s still a shortage of drivers
• The actors’ strike. Presumably most of the Screen Actors Guild members will return to work once that’s over (unless the union makes some crazy concessions on AI — not likely).

But Mr. Market is oblivious to details: At least for the moment, he’s convinced the Federal Reserve won’t raise rates this month.

As trading opened today, the S&P 500 added 11 points, rising to 4,519. If that holds by day’s end, it’ll be the strongest close in a month. The Dow is up nearly a half percent, while the Nasdaq is microscopically in the red.

Precious metals are little moved, gold at $1,942 and silver at $24.42.

But crude? Wowsers, up another $1.44 to $85.07. That’s the highest in a year, and the big rally this past week comes despite continued strength in the dollar relative to other major currencies. Paradigm trading authority Alan Knuckman says the dollar is poised to begin a new decline… and that should easily propel oil toward $90 before year-end. And if the $90 barrier is broken, $110 won’t be far behind.

The futures markets are also convinced the Fed won’t raise interest rates at its next meeting later this month: The activity suggests at 93% likelihood the Fed will stand pat on Sept. 20… and a 61% likelihood the Fed is already done with the rate-raising cycle it began 18 months ago.

Jim Rickards begs to differ. Read on…

Rickards Sticks His Neck out: Fed Raises This Month!

“Our expectation is that the Fed will raise interest rates another 0.25% at its next Federal Open Market Committee (FOMC) meeting on Sept. 20,” Jim Rickards wrote his Insider Intel subscribers on Wednesday.

“This would lift the fed funds target rate from 5.50% to 5.75%, the highest fed funds target rate since 2001.”

Why is Jim standing against the overwhelming consensus?

“At the June FOMC meeting,” he said, “the Fed official forecasts (the so-called dots) projected two rate hikes before the end of 2023. One of those rate hikes occurred at the July FOMC meeting. There are only three meetings left this year — September, November and December.

“If the Fed sticks to its ‘two rate hike’ projection, they will likely raise rates in September and then coast for the rest of the year and into 2024. A rate hike in September is likely to be the last in this series because monetary policy acts with a lag. The lagged effect of prior hikes is still working its way through the system.

“A September rate hike would have an impact into early 2024. September is likely to mark the achievement of the terminal rate at 5.75% (although in truth no one knows what the terminal rate actually is or if such a rate even exists. Still, it does make a nice Fed/Wall Street narrative).

“By the way, don’t let anyone tell you the Fed is not political,” Jim adds.

“They are hyper-political; it’s just that they do a good job of hiding it. They know 2024 is an election year. They don’t want to be blamed for a recession if they go too far, and don’t want to be blamed for inflation if they haven’t gone far enough.

“Their strategy is to finish the job of rate hikes in September. Then they will rely on lagged effects (and continued balance sheet reduction) to finish off inflation but distance themselves from a potential recession if one emerges in mid-to-late 2024. The Fed’s hands will be clean. They can blame bad outcomes on fiscal policy and politicians. The Fed’s ideal is to finish in September and then go to the sidelines for a year.”

• Recovered history: We’ve told the story before, but it’s worth telling again. Fed chair Arthur Burns notoriously opened the monetary spigots to help Richard Nixon win re-election in 1972. As legend has it, a German reporter asked Burns why he took such a reckless step that would stoke inflation later on (which it did). Burns said a Fed chairman must do what the president wants or else “the central bank would lose its independence.” Heh…

Bitcoin’s Big Deal Goes Bust

Bitcoin is winding down the week around $26,000 — right where it was before the big news on Tuesday.

As we mentioned at the time, a federal court ruled in favor of Grayscale Investments in its suit against the Securities and Exchange Commission. Grayscale wants to launch the first Bitcoin ETF, which the SEC had blocked.

Bitcoin’s price instantly jumped 7% — only to give it all back over the next 48 hours.

No surprise, says Paradigm crypto analyst Chris Campbell: “The decision merely obliges the SEC to give Grayscale’s Bitcoin ETF application the review it deserves. That's it. It's a battle won, but the war?

“The SEC has an entire armory of bureaucratic red tape it can still deploy. It can delay, it can reject and it can even take the case to the Supreme Court. This process could be dragged out until next year.

“If this were really the game-changer they’re claiming it to be, we’d expect a much more significant bump,” Chris says — “something that at least reclaimed the 200-day and 200-week moving averages.”

To be sure, other analysts are more optimistic: “Spot Bitcoin ETFs have a 75% chance of launching by the end of this year,” says Bloomberg ETF analyst Eric Balchunas.

Maybe, maybe not. We give Chris the last word: “Even if I'm wrong about Bitcoin, there’s a much bigger opportunity brewing in crypto. One that could leave Bitcoin in the dust -- AND prove paradigm-shifting for the rise of AI. We’re putting together a special report on just that.”

That got my attention. Watch this space as the month goes on…

The Mailbag: Distrusting Musk, French Wine Follies

“The evidence is that Musk is a front man for the companies he heads up,” a reader writes after yesterday’s edition.

“Musk says he is worried about AI, but through his company Neuralink he is actively working to connect the human brain to AI. SpaceX is blanketing the night skies with satellites to make sure the entire Earth (and our brains) can be connected to the cloud. Tesla seems to have unlimited resources unlike any normal company.

“Not to mention all the money he receives from the government for contracts and huge tax credits on Tesla vehicles. He put a World Economic Forum person in charge of Twitter X who recently announced a policy of shadow banning some speech.

“He is a walking contradiction who is in place to confuse the public and to hide the real money and powerful people behind him.”

Dave responds: I can’t bring myself to say there are people pulling his strings… but I totally understand why you would.

I’m more inclined to put him in the same category as Donald Trump. As I suggested when Musk bought his initial big stake in Twitter 16 months ago, they share the same basic problem — an indiscipline that undermines their aims, assuming they know what their aims are in the first place beyond their own self-aggrandizement.

“This is actually a century-old tradition for the French state to subsidize wine distillation when there is a glut,” writes a reader from Paris after Monday’s edition.

“This is not uncommon in Languedoc (southern France), where wine is inexpensive and produced in very large quantities. This is certainly less of a habit in the Bordeaux area.

“China became the largest export market for Bordeaux wine a dozen years ago (representing 20% of Bordeaux bottle sales), and the endless Chinese lockdown dealt therefore a terrible blow. Some Bordeaux wine growers are now constrained to sell their production at a loss; moreover, 70% of them have a monthly income under $1,200. Many are old and want to retire, but can't find a buyer for their vineyards in current market conditions.

“They contend that wine distillation is actually no real solution, as inventories will replenish because of the glut. They demand subsidies for vineyard uprooting to at last balance supply and demand. But these subsidies are prohibited by the European Union since 2009.

“In Burgundy, vineyard acreage only represents 25% of Bordeaux acreage and there is no overproduction.”

Dave responds: Yeah, I guess I’m not surprised the French state has been intervening in the wine market for a long time. Why should wine be any different from any other sector of the economy, right?

Fascinating background about the China impact. We always appreciate it when readers can share their ground-truth perspective!