Morning Download from Invincible Money

Personal finance + economics + markets

Finance in 5 minutes a day to help you make better money decisions.

Good morning investors! Washington has reached a tentative debt ceiling deal that Speaker McCarthy said includes “historic reductions in spending.”

📊 Economy 

🔨 Debt Ceiling Coming Down to the Wire

The White House and Republicans have a tentative deal to be voted on Wednesday.

• It includes no no taxes and no new government programs.

• Deal would include a 3% increase in defense spending, support for both green energy and permits for fossil fuel projects.

• IRS budget reduced by $10 billion.

• The Treasury’s cash balance is now below $40 billion.

President Biden said the deal “has historic reductions in spending, consequential reforms that will life people out of poverty and into the workforce, and rein in government overreach.”

📈 U.S. GDP grew by 1.3% in Q1

• U.S. corporate profits were up in Q1.

• GDP price index revised to 4.2% and PCE prices to 5.0%.

• What is it? PCE is the measurement of inflation using the Personal Consumption Expenditures Price Index, basically, how much consumer prices increased.)

After inflation numbers were released Friday, the market now thinks there’s a 58% chance of another rate hike coming.

📰 News

OpenAI may leave Europe depending on how their upcoming regulations shape up.

• In the latest plan the EU said AI companies with foundational models deemed “high-risk” would be required to release ALL of the copyrighted materials used to train the AI.

• Side note: OpenAI’s iOS app has over 500,000 downloads in 1 week!

📈 Stocks

Analysts are raising outlook

• Bank of America’s analyst raised her S&P 500 price target from 4,000 to 4,300 (with a range as high as 4,600).

• Morgan Stanley agreed, saying the benchmark would go to around 4,600 by end of year.

Earnings

❌ Costo [COST +4.43%] underperformed coming in at $2.93 EPS (vs. $3.30 expected), with $53.65 billion in sales (vs. $54.66 billion expected).

** I expected higher sales considering I spend so much $ there 🤷‍♂️

• Foot traffic was up 4.8% globally, but people aren’t spending as much (4.2% less), and big ticket items are down 17%.

❌ Best Buy [BBY +4.34] also missing on sales, but beat on earnings. The retailer noted “recessionary behaviors” in its customers as they have also cut back on spending.

🔐 Crypto

Ethereum to Moon (Eventually)

VanEck Research puts Ethereum’s price between $11,800 and $50,000 by 2030 in their latest report.

More from the report:

• “We now see ETH network revenues rising from an annual rate of $2.6B to $51B in 2030. Assuming ETH takes a 70% market share among smart contract protocols, this implies a token price of $11.8k in 2030, which we discount to $5.3k today.”

• The model’s assumptions revolve around fee generation, market share and regulations.

Crypto Going Mainstream

🍏 Apple Update: Axie Infinity: Origins listed in Apples app store & enables Apple Pay for STEPN. Neither included any “crypto” capabilities.

🐧 Pudgy Penguins released on Amazon and sold 20,000+ figurines in 2 days.

💵 Personal Finance

What does “Risk - Reward” mean?

Risk-reward is a term used in finance to describe the relationship between the potential loss and potential gain of an investment. A higher risk-reward ratio indicates that an investment has the potential for greater returns, but also the potential for greater losses. A lower risk-reward ratio indicates that an investment is less risky, but also has the potential for lower returns.

When evaluating an investment, it is important to consider both the potential risk and the potential reward. An investment with a high risk-reward ratio may be a good choice for investors who are willing to take on more risk in exchange for the potential for greater returns. An investment with a lower risk-reward ratio may be a good choice for investors who are looking for a more conservative investment.

Here is an example of how risk-reward can be used to evaluate an investment:

• Suppose you are considering investing in a stock that is trading at $10 per share. You believe that the stock has the potential to increase in value to $15 per share in the next year. However, you also believe that there is a 50% chance that the stock could decrease in value to $5 per share.

• In this case, the risk-reward ratio is 2:1. This means that for every $1 that you invest, you have the potential to gain $2. However, you also have the potential to lose $1.

• Whether or not you decide to invest in this stock will depend on your risk tolerance. If you are comfortable with the risk of losing $1, then this investment may be a good choice for you. However, if you are not comfortable with the risk of losing money, then you may want to consider investing in a less risky asset.

It is important to note that risk-reward is just one factor to consider when evaluating an investment. Other factors to consider include the investment's liquidity, diversification, and fees.

💰 Be a Better Investor

This quote highlights the fact that investing in crypto is a high-risk, high-reward proposition. Cryptocurrencies are still a new and volatile asset class, and there is no guarantee that they will continue to grow in value. However, there is also the potential for significant gains if you invest in the right projects.

If you are considering investing in crypto, like any investment, it is important to do your research and understand the risks involved. You should also only invest money that you can afford to lose.

🧠 Get Smarter

The dollar has been the world's reserve currency for over 70 years, but its dominance is now being challenged. A number of factors are contributing to this trend, including:

• The rise of China. China is the world's second-largest economy, and it is becoming increasingly assertive on the global stage. As China's economy grows, it is likely to demand that its currency, the renminbi, be used more widely in international trade and finance.

• The decline of the US economy. The US economy has been growing at a slower pace than China's in recent years. This has led to concerns about the US's ability to maintain its role as the world's leading economic power.

• The rise of regional currencies. A number of countries are now developing their own regional currencies, such as the euro and the ruble. These currencies are becoming more popular as countries seek to reduce their reliance on the dollar.

The decline of the dollar would have a number of implications for the global economy. It would make it more difficult for the US to finance its debt, and it would make it more expensive for US companies to do business overseas. It would also make it more difficult for the US to influence the global economy.

It is still too early to say whether the dollar will lose its status as the world's reserve currency. However, the forces that are contributing to de-dollarization are becoming increasingly powerful.

👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.