MoneyFitt

17 November 2022

Happy Thursday! Gettin’ there!!

US large-cap S&P 500 closed 0.83% DOWN 🔻 Tech-heavy Nasdaq Composite closed 1.54% DOWN 🔻 Pan European STOXX Europe 600 closed 0.99% DOWN 🔻 HK’s Hang Seng Index closed 0.47% DOWN 🔻 Japan’s Nikkei 225 closed 0.14% UP ▲

📝 FOCUS

Not Goldilocks. US too hot AND too coldTarget. Expect(ed) More. Pay Less (for the shares)FTX Dominos 🁬🁊, BlockFi, Genesis, Gemini and Larry DavidWhere in the World Is Crypto Sandiego?

📖   MoneyFitt EXPLAINS

🎓  Recessions

📊 IN THE MARKETS

Inflation in the UK hit 11.1% in October, yet another 40+ year record, deepening the country’s cost-of-living crisis. Brits faced prices 2% higher than the month before, which may not sound too bad, but 12 months of those, one after another would land you with prices TWENTY SEVEN PERCENT HIGHER. 2% is the target for the Bank of England, the UK’s central bank, for an entire year, which explains why its governor recently predicted a two-year recession 🎓 for the country. 

Unlike recent data in the US, UK inflation came in higher than the previous month, 10.1%, by a lot. Unemployment is still relatively low, for now, at 3.6%, but when adjusted for rising prices, wages overall fell 2.7% in September. Later today, the UK chancellor will be announcing a package of tax hikes and spending cuts worth up to 60 billion.

📝 FOCUS

Not Goldilocks. US running too hot AND too cold.

US retail sales including food and fuel in October rose by 1.3% on the previous month, a little more than the 1% that experts had predicted and the biggest monthly increase this year.

Compared to a year ago, sales were up 8.3%, but with inflation at about that number, it seems that much is from spending more because prices are higher for things they’d normally (have to) buy. The labour market remains red-hot, but consumers seem to be spending out of (falling) savings and increasing their use of credit, which obviously isn’t super sustainable.

Meanwhile, manufacturing output growth grew by just 0.1% in October, half of the increase predicted by economists, presenting a mixed picture on the economy and giving traders a decent enough excuse to lock in profits made the day before.

Target. Expect(ed) More. Pay Less (for the shares)

US “big box” retailer Target dropped 13% and lost US$10 billion in market capitalisation (share price times number of shares) after October quarter profits halved from a year earlier, while highly-paid Wall Street analysts were expecting only a drop of less than a third. (Target’s year-end is not December like the rest of us, but in January, so its “fiscal 3rd quarter” is the 3 months to the end of October. This is quite common for retailers because of the Christmas shopping season. Walmart is the same.) 

Target is slashing forecasts, blaming steep discounts from high inventory levels (unsold goods.) Poor planning is part of the issue, but it’s as much due to its product mix, with decades high inflation forcing consumers to pick between their needs (food, cars, furniture and clothes) and their wants (what Target sells.) Often, multibillion-dollar cost cuts and big job losses are greeted by heartless Wall Street traders with a big rally. Not so for Target this time.

🁻🁘 Let’s play FTX Dominos! BlockFi, Genesis, Gemini and Larry David

FTX in the Bahamas filed for bankruptcy protection in NY under “Chapter 15”, a way for foreign companies to use US bankruptcy law, with greater protections for the companies, to restructure debt. On top of a million or more creditors, the FTX / Alameda crypto debacle is taking down other big names as well.

Crypto lender BlockFi will file for bankruptcy due to “significant exposure” to FTX, having already “paused withdrawals” and politely suggested that customers not put any more money into their wallets or interest accounts.

The lending arm of crypto investment bank Genesis, with about US$2.8 billion in loans, suspended redemptions and loan originations because of its FTX exposure. Shortly after that, Cameron and Tyler Winklevoss’ crypto platform Gemini Trust said it is pausing withdrawals on its interest-bearing Earn accounts because of lending partner Genesis (because of FTX because of Alameda because of Sam).

And now investors are suing not only SBF but also several celebrity FTX endorsers, including NFL quarterback Tom Brady and comedy legend Larry David for deceptive practices selling FTX yield-bearing crypto accounts which were (allegedly) unregistered securities sold unlawfully in the US. Other defendants include Steph Curry, Gisele Bündchen, Shaquille O’Neal and the Golden State Warriors (among others.)

The US is considering extraditing SBF from the Bahamas to question him on exactly what happened. Assuming he really is there.

Where in the World Is Crypto Sandiego?

Let’s see how GeographyFitt you are! Where does SBF say he is? (No, Argentina’s not on this map.) Can you identify which letter The Bahamas is closest to and name all the others as well? Some are well-known tax-havens, some are holiday destinations, and one of them has a type of shorts named after it. And one of them may be where Jho Low’s staying. Answers at the end.

Thank you for spending a few minutes of your time with us. Remember to take time for yourself and be thankful for what you have.

📖 MoneyFitt EXPLAINS:

🎓 Recessions 

A country’s in a recession when there is a significant decline in economic activity, usually with a rise in unemployment. A common rule of thumb is when economic output goes down in two or more consecutive quarters. This is measured by its real (inflation-adjusted) GDP, which is a measure of the size of an economy and is the monetary value of goods and services produced there in a particular period.

Bear markets and recessions are not the same thing. (Bears are lazily defined these days as a drop of 20% from a recent peak.)

Recessions often trigger an increase in the unemployment rate, which is based on the number of workers who want a job but don’t have one. This is painful and can be socially disruptive, but unfortunately is part of the normal business cycle where good times lead to a period of over-investment, over-hiring and over-consumption, followed by a hangover.

An important thing to note is that economic boom and bust cycles are normal, even if the ending of a period of growth is in the form of a nasty recession. Up-cycles always end, eventually, as do down-cycles, though when you are in one, it is very hard to see the light at the end of the tunnel. But they do end.

This is important to remember since recessions are often (not always) accompanied by bear markets, so for disciplined and careful investors, recessions and bear markets have often been great long-term buying opportunities.

There he is!

And for those of you who like it in letters:

A. Cuba

B. Miami, Florida

C. The Bahamas

D. Cayman Islands

E. Jamaica

F. Puerto Rico

G. British Virgin Islands

H. Cancun, Mexico

I. Bermuda

J. Haiti

How many did you get?

Please do your own research – we create educational and entertaining content so you can start the day understanding the financial and business worlds a little better. However, this is NOT financial advice.

MoneyFitt (Spendolater Pte Ltd) is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. The information contained is not intended to be a source of advice or credit analysis with respect to the material presented. Any ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial, tax or legal professional and independently researching and verifying information. Content is intended to be used and must be used for informational purposes only.

MoneyFit Morning Archive (to 07-Nov-22)