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! Inflation is coming down and Goldman Sachs is feeling a recession is less likely. Michael Jordan remains the GOAT. BlackRock’s big Bitcoin announcement and what the heck is VIX anyway?

The S&P 500 has now gained back ALL the losses since the Fed started raising rates (up 20%)!

📊 Economy 

Markets too optimistic?

Goldman Sachs strategists believe that markets are too optimistic about the pace of inflation cooling. They expect further declines in inflation, but markets are pricing in a more rapid easing of price pressures. The strategists point to a sharp deceleration in growth and a more bearish view on energy prices as reasons for their outlook.

• Goldman Sachs expect inflation to decline to 3.7% by the end of the year.

• The market is pricing in inflation of 2.5% by the end of the year.

Overall, the Goldman Sachs strategists believe that inflation will continue to decline, but at a slower pace than markets are expecting.

Recession Less Likely Now

Goldman Sachs economists also say there's a 25% chance of a recession in the next 12 months, down from their earlier projection of 35%.

• The probability of a recession has declined as the risk of a disruptive debt-ceiling fight has disappeared and stress in the banking sector appears to be only a modest drag on the economy.

• The U.S. economy added 261,000 jobs in May, beating expectations.

• The unemployment rate remains at a low 3.7%.

• Wage growth is slowing, but still running at a healthy pace of 5%.

• GDP growth is expected to slow to 1.8% in 2023, but remain positive.

These stats suggest that the U.S. economy is still growing, but at a slower pace than in recent years. This could make a recession less likely, but it is still a possibility.

The big questions is if the Fed has to raise rates again to get inflation down to the 2% target. It’s now highly dependent on the labor market, but so far, so good.

🚙 NOTE to car buyers: If you’re looking to buy a car or rent an apartment, they expect used car prices and rents to come down starting this month.

📰 News

Jordan Sells Hornets

Michael Jordan, the NBA's all-time leading scorer and six-time champion, is selling his majority ownership stake in the Charlotte Hornets for an estimated $3 billion. The sale to a group led by Gabe Plotkin and Rick Schnall ends Jordan's 13-year run as majority owner of the North Carolina team. Jordan will remain a minority owner as part of the deal.

Jordan paid $180 million in 2010 to take control of the team, then known as the Charlotte Bobcats. He has since overseen a turnaround that has seen the Hornets make the playoffs four times in the last six seasons. The team is currently in the midst of a rebuilding process, but it remains one of the most popular and successful franchises in the NBA.

The sale of the Hornets is the latest in a series of high-profile NBA transactions. In recent months, the Minnesota Timberwolves, New Orleans Pelicans, and Atlanta Hawks have all changed hands for billions of dollars. The NBA's rising popularity and profitability has made it one of the most attractive sports leagues for ownership groups.

Meta Open Sources LLaMA

Meta's open-source LLM (large language model), LLaMA, was leaked 3 months ago and is now the leading open-source foundational model.

Now, Meta is gearing up to let companies use LLaMA.

This has three major implications:

1. Great for companies that roll out custom models on top of LLaMA for their own products (while making money, of course).

2. Great for Meta. Developers use their code → their models improve → better models to integrate into products like Facebook.

3. Not great for Google & OpenAI, whose models are still closed-source.

LLaMA is just below GPT-3.5 capabilities, but the ability to fine-tune models could lead to a wave of LLaMA-powered products in the market.

Flashback: Last month a leaked internal Google memo warned that Google and OpenAI would lose to open-sourced models. That seems to be happening!

Our take: This is a positive development for the LLM industry as it will lead to more innovation and better products for consumers.

📈 Stocks

S&P 500 4,409.59 (-0.37%)
DJIA 34,299.12 (-0.32%)
NASDAQ 13,689.57 (-0.68%)
VIX 13.48 (-6.62%)

SoFi Technologies [SOFI -9.95%] took a beating Friday.

The stock fell after 3 Wall Street analysts turned cautious on the online lender. The stock has doubled this year, but analysts now see risks from rising interest rates and slowing loan growth. SoFi is still seen as a growth company, but it may not be able to sustain its recent rally.

Samsonite International S.A. [SMSOF +13.08%] - the Hong Kong-based luggage company closed up 13% on no company news, but likely on broader optimism in the travel sector.

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🔐 Crypto

BlackRock gets into Bitcoin

BlackRock, the world's largest asset manager, has filed for a Bitcoin ETF.

• The ETF would track the price of Bitcoin, allowing investors to get exposure to the cryptocurrency without having to directly buy it.

• BlackRock said it would use Coinbase as the custodian for the ETF.

• BlackRock is just packaging up the ETF. The EFT would actually be done through iShares, Coinbase will hold the BTC that backs it and BNY Mellon would be the custodian holding the cash from investors.

However, U.S. regulators have not yet approved any Bitcoin ETFs.

BUUUT, BlackRock always wins - 575 approvals and only 1 rejection in its history.

Insiders speculate this is already a done deal.

The filing by BlackRock is seen as a positive development for the cryptocurrency industry. It is another sign that the asset class is maturing and gaining mainstream acceptance.

BlackRock’s ETF is a bit different in that they teamed up with the NASDAQ in an attempt to prevent market manipulation, which may increase the chances of approval.

Staked ETH near flipping ETH on exchanges

The amount of ETH in exchanges has steadily been decreasing as people pull it out to stake it - either on their own node or through a service like Lido.

Only 1.4 million ETH to go!

💰 Be a Better Investor

🧠 Get Smarter

How can you use the VIX?

The VIX, or Volatility Index, is a measure of the expected volatility of the S&P 500 index over the next 30 days. It is calculated based on the prices of options on the S&P 500 index.

👉🏾 A higher VIX indicates that investors expect greater volatility in the market, while a lower VIX indicates that investors expect less volatility.

The VIX is often used as a measure of investor fear or uncertainty.

• When the VIX is high, it means that investors are worried about the future of the market and are expecting large swings in prices.

• When the VIX is low, it means that investors are more confident about the future of the market and are expecting smaller swings in prices.

The VIX can be used by investors to help them make investment decisions. For example, investors may choose to buy stocks when the VIX is low and sell stocks when the VIX is high. Michael Burry is said to use it extensively.

** Investors should not make investment decisions based solely on the VIX. They should also consider other factors, such as the overall economic environment, the performance of individual stocks, and their own investment goals.

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

Sponsor disclosure:“Net Return" refers to the annualized internal rate of return net of all fees and costs, calculated from the offering closing date to the date the sale is consummated. IRR may not be indicative of Masterworks paintings not yet sold and past performance is not indicative of future results. See important Regulation A disclosures at masterworks.com/cd.