MoneyFitt

19 December 2022

🌎🏆⚽️🇦🇷🇫🇷🇭🇷🇲🇦

Happy Monday🎄!

US large-cap S&P 500 closed 1.11% DOWN 🔻 Tech-heavy Nasdaq Composite closed 0.97% DOWN 🔻 Pan European STOXX Europe 600 closed 1.2% DOWN 🔻 HK’s Hang Seng Index closed 0.42% UP ▲ Japan’s Nikkei 225 closed 1.87% DOWN 🔻

📊 IN THE MARKETS

Higher for longer, US Recession? UK Recession!

📝 FOCUS

An NFT comeback… With Donald Trump?Want to buy some (more) Twitter shares?

📖   MoneyFitt EXPLAINS

🎓 Non-Fungible Tokens

📊 IN THE MARKETS

Stocks dropped on Friday, continuing the sell-off since the start of December, though at a slower pace than Thursday (when complacency after the Fed hike first gave way to fears about a US and global recession.) 

There is of course no one single “market view” out there, but many smart voices are sounding alarm that The Fed –the US central bank– despite the slower pace of rate hikes on Wednesday, may tighten too much (with interest rates held too high for too long) and tip the economy into a recession. Inflation already seems to have peaked and yet rates are still expected (by the Fed) to go yet higher in 2023, with three prominent Fed policymakers on Friday saying rates may exceed 5.1% and be held there till 2024. But they don’t expect a recession. 

Meanwhile, traders don’t seem to believe them and expect peak rates to be below 5% and for the Fed to start cutting rates in the second half of 2023 as a painful recession bites, with potentially a million jobs lost. The NY Fed, though, seems to agree, modeling a 0.3% drop in the economy next year and flat growth in 2024.

Mini Explainer: Recessions

Echoing Thursday’s weak November retail data in the US, British retail sales unexpectedly fell 0.4% between October and November with the cost of living crisis crushing household finances and consumer confidence. Experts had been predicting 0.3% growth! 

Gross domestic product (GDP) fell in the third quarter, and all signs are pointing to another drop in the fourth quarter, which would confirm what everyone is already feeling: the UK’s in a recession… and it’s expected to be a long one, lasting well into 2023. 

A country’s in a recession when economic activity drops, and usually many jobs are also lost. It is often defined as two quarters of shrinking “Gross Domestic Product” in a row. “Good times” lead to a period of over-investment, over-hiring and over-consumption, followed by a hangover when investment slows, consumer confidence drops and jobs are lost. An important thing to note is that economic boom and bust cycles are normal. Up-cycles always end, eventually, as do down-cycles. Always.Bear markets and recessions are not the same thing, though they often (but not always) happen together, so for disciplined and careful investors, recessions and bear markets have often been great long-term buying opportunities.

Echoing Thursday’s weak November retail data in the US, British retail sales unexpectedly fell 0.4% between October and November with the cost of living crisis crushing household finances and consumer confidence. Experts had been predicting 0.3% growth! 

Gross domestic product (GDP) fell in the third quarter, and all signs are pointing to another drop in the fourth quarter, which would confirm what everyone is already feeling: the UK’s in a recession… and it’s expected to be a long one, lasting well into 2023. 

📝 FOCUS

An NFT comeback… With Donald Trump?

Former US president and potential Republican candidate for the presidency in 2024 Donald Trump alerted fans to a “major announcement” on his Truth social media platform on Wednesday. Turns out it was a collection of US$99 digital trading cards (NFTs) on the Polygon blockchain of his likewise in a series of bizarre and hilarious (to some) poses in stock photo outfits for sale. Some Trump images had only one NFT associated with them, while others had up to 20. Buyers were also entered in a raffle for Trump-related prizes.

Cue much ridicule online, in the press and on late-night TV comedy shows… yet all 45,000 NFTs sold out in less than a day, netting US$4.5m in sales and many millions more in ETH trading on the Opensea marketplace where it is the top trending collection. Seems Trump was right in saying it’s “very much like a baseball card but hopefully much more exciting”. In fact, the cheapest Donald Trump Trading Card NFTs are already selling for US$600, with the floor price swinging from about US$380 to US$990 over the weekend. One traded for over US$43,000. (Turns out, Trump just licensed out his image, so the benefit to is less direct)

NFTs, or nonfungible tokens, are tokens on a blockchain that can be used to trace the history and proof of ownership of some kind of unique digital asset. The first NFT collections appeared in 2017, speculative excesses in 2021 drove some to insane levels, with the most famous NFT, The Bored Ape Yacht Club, launching at US$250 and peaking at $400,000. Prices and trading volumes have cooled down since, but Yuga Labs, the creator of the BAYC project, recently raised US$450 million for a company valuation over $4 billion.

Marketplaces such as Opensea are set up for digital art collections, but since any kind of digital file can be stored as an NFT, more are now supporting video, game assets, music and even physical items such as limited edition Nike trainers and other collectibles. In “for the lulz” or a genuine investment for sustainable long term financial gains? You decide.

Want to buy some (more) Twitter shares? 

Investors who bought Twitter shares alongside Elon Musk are being offered the chance to buy new shares at the original (weed joke) price of $54.20. The new money would be used for a “hiring spree” of programmers to build a “super app” that could process payments, among other services such as messaging, social networking, peer-to-peer payments and e-commerce shopping. This would help Musk grow Twitter’s 237 million users to “at least a billion”.

In addition to taking on debt, Musk talked other partners into funding US$7 billion of his US$44 billion takeover of Twitter. Investors included Sequoia Capital, Andreessen Horowitz, Oracle co-founder Larry Ellison and cryptocurrency exchange Binance.

The amount Twitter is trying to raise wasn’t revealed, but it needs to be big enough to cut the US$1.2 billion annual interest bill for the US$13 billion debt portion of Musk’s leveraged buyout of the company (which loaded the company with the debt used to fund its own takeover) and what Musk tweeted was “a massive drop in revenue” from advertisers fleeing the platform.

Elsewhere in the Muskoverse, leaving out the worrying suspension of prominent Twitter-following journalists FROM Twitter, Musk sold another US$3.6 billion of his Tesla shares, bringing the total to US$40 billion in 8 transactions this year alone for personal taxes and his equity share of the Twitter acquisition. Musk still holds 13.4% and is the largest single owner in the electric-vehicle company that he co-founded in 2003. Meanwhile, other shareholders of Tesla are increasingly frustrated with Musk’s distractions, with the share price down 62% this year (and 54% since he first bid on April 14th.)

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

🎓 Non-Fungible Tokens (NFTs)

An NFT, a non-fungible token, is a token on a blockchain secured through a smart contract. It can be used to trace the history and proof of ownership of some kind of unique digital asset, and it can then be sold and traded on NFT marketplaces and some crypto exchanges. But the NFT is like the title deeds to a house, rather than the house itself. An NFT can represent the fractional ownership of an asset and can be associated with any type of digital media, such as photos, videos, artwork, music, audio files or gaming code. Royalties are a big part of the appeal for artists and creators (Paris Hilton, Damien Hirst etc) as they set a royalty rate (e.g. 10%) for every sale of every NFT in the collection, like sales commission payable back to the original creator. (But a Dec-22 study looking at ethical issues around launching NFTs concluded “unless there is absolutely no other way to solve a problem other than using NFTs, then they should not be implemented.”)As a still-new traded product, there is still a lot of price volatility and hype, even after the 2022 crash. Readers are warned that NFTs are currently unregulated, which can lead to potential scams or fraudulent activity.

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.