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The Doge dumpster fire

Good morning! The Dogecoin party took a blow over the weekend, with the meme cryptocurrency plunging over 25% on Sunday following 'dogefather' Elon Musk's much-hyped Saturday Night Live appearance, where he called Dogecoin "a hustle".

Market Wrap

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Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The US S&P500 (+0.74%) hit a fresh record high on Friday despite disappointing jobs data. Why you might ask? Because it means the pandemic recovery isn't flowing as smoothly as the Fed might like, reducing the odds of an interest rate hike. Bad news is good news when stock valuations are contingent on stimulus continuing ad infinitum.

Recovery stutters: The US unemployment rate ticked up to 6.1%, the first increase since April 2020, with just 266,000 jobs created in April. That's down from 770,000 jobs created in March and well below market estimates for 1 million new jobs.

Upgraded outlook: The RBA upgraded its forecasts for Australia's GDP growth and unemployment. It now expects GDP to grow by around 4.75% (up from 3.5%) over 2021 followed by 3.5% over 2022 (unchanged). It expects unemployment to be 5% by the end of 2021 (down from 5.5%) and 4.5% by the end of 2022 (down from 5.5%). But still no rate hike until 2024? 🤔

Food inflation: The United Nations' Food Price Index averaged 120.9 points in April, which was the eleventh consecutive monthly rise, 30.8% above the same period last year and its highest level since May 2014. Rising food prices can contribute to rising tensions and political instability in many parts of the world...

Crypto Wrap

The Doge dumpster fire

Dogecoin has been on quite the run.
Dogecoin has been on quite the run. CoinMarketCap

Well, where do we begin? For those out of the loop, Dogecoin – which started as a joke – has been the best performing cryptocurrency over the past year. On 1 January 2021, a single dogecoin was worth 0.0047 US cents. By 8 May 2021 (so, Saturday), it was worth 0.725 US cents. That's an increase of 15,192% in just over five months. At the time of writing it was worth 0.55 US cents, a decline of around 25% in just two days.

A meme coin: In a sign of the times where everyone is cashed up, real yields on cash are negative and meme stocks are outperforming ... everything, there just had to be a meme crypto as well. That's all well and good, except that it's a pump and dump. No one intends to hold it long-term and not everyone can cash out ahead, despite the many claims to the contrary. Big price crashes can and will happen.

Not special: There's nothing particularly special about Dogecoin. It's not innovative – it's a fork of Luckycoin, which was itself forked from Litecoin – and prior to the price surge it was primarily used to give worthless 'meme' tips on various social media platforms. Its value is contingent on there always being a greater fool willing to pump its price.

The Musk effect: Elon Musk is worshipped by the young retail investors addicted to gambling on meme stocks and cryptos. He has been spruiking Dogecoin and even embraced the title of the 'dogefather'. However, his performance on Saturday Night Live was anything but convincing – he failed to adequately answer multiple questions along the lines of "What is Dogecoin", eventually agreeing with the cast that it's "a hustle". Dogecoin promptly crashed.

The Wrap Up

  • Budget 2021-22: Tomorrow's budget will include the assumption that Australia's borders open in 2022.
  • Budget 2021-22: The budget will also include $10 billion for infrastructure spending over the next 10 years, such as a new freight hub in Melbourne and an upgrade to the Great Western Highway in New South Wales.
  • About 900 'vulnerable' Australians will be repatriated from India from 15 May. They will be flown directly to the Howard Springs quarantine facility in the Northern Territory. However, commercial flights will remain suspended.
  • China now accounts for more greenhouse gas emissions than all of the world’s developed nations combined.
  • That Chinese space debris (the remnants of its 20-tonne Long March 5B rocket) re-entered Earth's atmosphere somewhere over the Arabian Peninsula on Sunday morning. The exact landing spot will not be disclosed but was likely in the Indian Ocean.
  • The Scottish National Party (SNP) won a fourth term in government. However, it fell one seat short of a majority, reducing the likelihood of a fresh independence referendum, at least in the short term.
  • Just 4% of iPhone users in the US have agreed to app tracking after updating their device with Apple's new App Tracking Transparency feature. That's despite Facebook pleading for people to accept tracking, warning it will "Help keep Facebook free of charge". But would anyone actually use Facebook if they had to pay? 🤷‍♂️