PPI Has Run ~200bps Above CPI — And Crypto Is Priced Off Rate Expectations
TREE NEWS reports: OnePoint BFG’s CIO is warning that investors are reading the inflation story too narrowly. While markets fixate on CPI prints, producer prices have been running roughly 200 basis points above consumer prices — a persistent margin squeeze on businesses that, in his view, the bond market is not adequately discounting.
“I beg everyone not to just look at CPI and think that’s the whole inflation story,” he said. “If CPI falls to 2% but PPI is at 4%, is the Fed’s job done?” His answer is no — and that gap matters enormously for any asset priced off the risk-free rate.
Two Economies, One Index
The CIO describes a bifurcated market: companies tied to AI data-center buildout are thriving regardless of higher capital costs, while everything else faces expensive financing, elevated diesel and gasoline prices, and a squeezed low- and middle-income consumer. Delta Air Lines, he notes, is not an AI stock but benefits indirectly from the wealth effect the AI trade creates. Banks earn heavily from AI-driven capital markets activity.
Even inside the AI trade, cracks are visible. He points to China’s CXMT and its memory-chip ambitions, the pending listing of NAND producer YMTC, falling token prices, and a possible Anthropic IPO — all as competitive pressures that investors should track on a dashboard.
Real Estate Already in Recession
Existing-home sales sit at 30-year lows, with 30-year mortgage rates above 7% creating a lock-in effect. He argues falling prices in some markets would be healthy, restoring affordability for first-time buyers — the missing link that keeps the whole market from clearing.
Bonds: Pain Already Delivered
Buying a 30-year Treasury in November 2020 would now show a 53% mark-to-market loss, he notes, with early stress appearing in the lower rungs of corporate credit. Still, he suspects long-end yields may have peaked near-term — though he remains positioned short the long end, favors the front end, and calls TIPS attractive precisely because he believes the bond market underestimates average inflation over the next five years.
Why This Matters for Crypto
- Rate expectations drive risk assets. If inflation is stickier than CPI suggests, cuts get delayed and the discount rate on long-duration assets — including crypto — stays higher for longer.
- TIPS and short-end yields become serious competitors for capital that might otherwise rotate into digital assets.
- Energy exposure stays attractive as a diversifier, with oil seen holding higher for longer given inventory normalization needs of 18 months to two years.
The takeaway: crypto investors should watch PPI alongside CPI, treat the front end of the curve as a real alternative, and prepare for a market where the “macro verdict” of steady 2% growth masks deep dispersion underneath.
