Welcome to our November Viewpoints, a monthly bulletin from PDS Planning to our valued clients and friends. Our goal with each issue of Viewpoints is to provide you with a wide variety of perspectives on life and wealth. Feel free to share with others.
US Inflation
Inflation remains high, but reports show it eased up as the year-over-year inflation reading dropped to 7.7% from 8.2%. It’s the first sign the Fed’s interest rate hikes are working. Investors rejoiced and market roared higher with the idea that those pesky rate hikes could finally slow down, or even start coming back down. Markets have since leveled off, returning to their new-normal level of volatility, after St. Louis Fed chair reminded us there’s still a long way to go. (Source: Wall Street Journal)
Global Inflation
Easy money and economic stimulus drove the economy forward during the pandemic, but now the negative effects of this are being felt through inflation and GDP slowdowns. Central banks around the world are mirroring the Fed’s work by raising interest rates and trimming balance sheets to try and get the widespread inflation contained. Everyone’s goal is a soft landing, but only time will tell if global recessions can be avoided. (Source: Schwab Q4 Chartbook)
Prime Minister Carousel
45 days after taking office, Liz Truss was out as the British Prime Minister, the shortest service in history. During those 45 days, the pound reached record lows against the dollar, bond yields ripped to their highest levels since 2007 leading to Bank of England intervention, and tax cuts for the highest earners were walked back. Despite all of this, Truss is still being offered the benefits all other PM’s have received in the past. Namely, she can claim what’s called the Public Duty Costs Allowance, currently set to a maximum of 115,000 pounds per year. Former PM’s have not always claimed the full amount and the public won’t know until figures are published next year. The new Prime Minister, Rishi Sunak, officially took over on October 25th. (Source: BBC and Barron’s)
It’s Chaos Compared to Enron
The once third largest cryptocurrency exchange, FTX is bankrupt. The company dropped in value from $32 billion to bankrupt in a matter of days, dragging former CEO Sam Bankman-Fried down with the ship. CoinDesk released a report that Bankman-Fried’s hedge fund, Alameda Research, was founded using a native FTX token FTT, not a fiat currency. This raised red flags for many at the amount of undisclosed leverage being taken. This ultimately led to a run on FTX and the token FTT, and there wasn’t enough cash on hand to issue withdrawals for all the request. Days later, the Bahamas regulators froze all company assets and seized $400+ million.
The company is now being run by John J. Ray III, a lawyer who helped creditors recover money after Enron. He described FTX, “a workplace ruled by chaos, with lax financial reporting, incomplete record-keeping, and questionable management practices.” This situation is still evolving and new information is being released by the hour. (Source: Investopedia and Barron’s)
Crypto Bubble
Bitcoin and other cryptocurrency has taken a deeper dive after the news about FTX. Bitcoin has dropped 75% since the peak in November. See below for a great visual on how it compares to other bubbles. (Source: Fortune)
Mortgage’s Sharp Dip:
30-year mortgage rates dropped sharply last week, from an average of 7.08% down to 6.61%. On a $400,000 home, this would represent about $130 saved per month. Following the decrease, economists saw the mortgage applications index jump nearly 3%. (Source: Money.com)
8 billion:
It’s estimated that we reached a new milestone this month – the world population reaching 8 billion people. In 48 years, the world population doubled in size. (Source: Visual Capitalist)
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