Morning Market Download from Invincible Money

Personal finance + economics + markets

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

Economy

The U.S. Fed raises rates 0.25%, as expected and signals an end to hikes. This was the 10th hike in the past year. The Fed deleted a sentence from their previous statement which read, “the Committee anticipates that some additional policy firming may be appropriate” to reach the 2% inflation goal."

Since it was widely expected, the stock market reacted by sinking 250 points of 0.8%, or kind of “meh.”

Shares of U.S. regional banks were down this week as many wonder how many more banks are going to fail. There are over 2000 banks with liabilities greater than their assets.

Trading in PacWest Bancorp and Western Alliance Bancorp was halted Tuesday as investors sold shares, resulting in a drop of 28% and 15%, respectively.

Bank CEO from the EU at UniCredit says he doesn’t see the same level of risk in the EU as the US, but feels more bank rescues are to come in the US.

The JOLTS report is out and the number of job openings in the U.S. is at its lowest since May 2021 at 9.59 million. Layoffs and discharges were up 248,000 to 1.8 million. A lower number is better as it means the economy is slowing, which is good for lowering inflation.

Layoffs du jour: latest to announce layoffs: Citigroup, Lazard and Bank of America.

News

House Democrats are trying to force a vote on the debt ceiling after Sec. Yellen said the U.S. could run out of cash by June 1. They’ll need to win over some Republicans for it to succeed. Republicans want spending cuts as part of the deal.

Stocks

Two more companies beat expectations, staying with the trend:

Advanced Micro Devices (AMD) reported $0.60 EPS (vs $0.56 expected) on $5.35 B in sales.

Ford reported $0.63 EPS (vs $0.41 expected) on $39.09 B in sales.

Crypto

Everyone’s friends over at 3AC (3 Arrows Capital), the failed hedge fund that helped bring about the crypto winter, were issued a reprimand from Dubai’s Virtual Assets Regulatory Authority (VARA) for operating their new OPNX exchange on an unregulated basis.

Coinbase and Gemini both set up international exchanges, as they fight with U.S. regulators.

A new blockchain called Sui went live yesterday. It was created by 2 former members of the Meta (Facebook) Diem (Libra) team.

Last week the House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion convened to discuss stablecoins. Here’s the TLDR.

Regulatory scrutiny of stable coins in the United States has increased, and stable coins could be considered securities according to SEC Chairman, Gary Gensler. Stable coins are backed by U.S. government debt and hold a stable value. The SEC's recent Wells notice to paxos has created regulatory uncertainty for stable coins issued in the United States. The recent stablecoin hearing is more important for crypto and even for the US dollar than the hearing with Gary Gensler.

Stable coins are used as the backbone of the crypto market, and every coin and token trades against a stable coin. The hearing, titled "Understanding Stablecoin's Role in Payments and the Need for Legislation," had witnesses from industry experts to politicians who discussed the regulation of stable coins at both state and federal levels. Witnesses also highlighted the benefits of stable coins for the US government, and the need to compete with China's digital yuan.

Despite some concerns, stablecoins do not seem to be a priority for the US government as they have other means of subsidizing themselves. In the long term, stablecoins may become obsolete due to the rise of central bank digital currencies or the eventual worthlessness of fiat currencies. (source)

Personal Finance

Here are 3 easy steps to becoming a better investor:

1. Educate yourself about investing.(Might I suggest my YouTube channel to start?)

2. Create a plan based on your goals, risk tolerance, and time horizon.

3. Stay disciplined and stick to your plan, even during market volatility.

What will be the best jobs in the future? No surprise, they’re all in AI, data analytics and engineering, according to a report by the World Economic Forum (WEF).

Be a Better Investor

Get Smarter

What does it mean when the Fed raises interest rates?

When the Federal Reserve (the "Fed") raises interest rates, it means that they are increasing the cost of borrowing money. The Fed can do this by raising the federal funds rate, which is the interest rate that banks charge each other for overnight loans.

When the federal funds rate increases, it becomes more expensive for banks to borrow money from the Fed or from each other, and they may pass those higher costs on to consumers by raising the interest rates on loans, such as mortgages, car loans, and credit cards. This can make it more expensive for consumers and businesses to borrow money, which can slow down economic growth.

The Fed may raise interest rates for a number of reasons, including to combat inflation or to slow down an overheating economy. By making borrowing more expensive, they can reduce the amount of money flowing through the economy, which can help to keep prices from rising too quickly. However, raising interest rates can also have negative effects, such as slowing down job growth and reducing consumer spending.

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