TOGETHER WITH  | Good day. Can you guess how many recessions there have been in the US since 1945? a. 3, b. 13, c. 23. Follow the wave 🌊 below for the answer. Here are our money topics for today: - What the heck is happening in the crypto world?
- What we've learned so far from Q3 earnings
- Savings bonuses galore
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CRYPTO What the Heck is Happening in the Crypto World? | | | | The crypto world has endured the doldrums of a long winter dating back to last year, and it's not clear at the moment when or if the seasons will ever change. Tough times globally for traditional markets and crypto's internal weaknesses have combined to create a chaotic situation that feels as if it's nearing an apex — but how bad is it? Fall from grace - Feeling pessimistic: Dating back to 2021's November rally, Bitcoin has fallen 73%, Ethereum is down 71%, and a variety of other projects like Cardano, Polygon, Polkadot, Solana, and more are all down 50% or more as 2022 has crushed crypto sentiment all around.
- A rough year: After an already bearish spring, summer brought us an array of events that all hurt crypto's morale even more. We had the TerraUSD crash back in May, followed by a spree of crypto bankruptcies in July, a stable, mundane Q3 as concerns lingered, and now we're faced with another possible market contagion.
What happened this time? - FTX explained: FTX was one of the fastest-growing crypto exchanges in the world. You've probably seen them everywhere — they spent 15% of their revenue on marketing in 2021. It was valued at $32B as recently as January and has now filed for bankruptcy.
- The details: Basically, crypto exchange Binance had a large stake in FTX that they recently chose to sell, a transaction for which they accepted payment in the form of FTT, which is FTX's native (and illiquid) token. This flooded the market with FTT tokens and tanked its price, which is bad enough, but even worse when you learn that SBF, Sam Bankman-Fried (FTX's now former CEO), also owns a trading fund (Alameda Research) that happened to hold a lot of FTT on its books.
- The aftermath: This led to a liquidity crunch and eventually insolvency. FTX CEO SBF quickly agreed to a deal with Binance to buy out FTX and promptly shut down Alameda Research too, but that deal fell through as Binance decided it wasn't in their best interest. In the meantime, FTX needs $8B worth of emergency funding (that no one wants to foot) to cover withdrawal requests received in recent days as a lot hangs in the balance.
- And the after-shocks: On the day FTX filed for bankruptcy, a mysterious hacker stole about $400 million in digital assets from the exchange. We then learned that another crypto exchange, Crypto.com, accidentally sent $400M in Ethereum to the wrong address they were able to recover days later. Crypto.com is now busy reassuring customers that their deposits are safe and that the company is on solid footing. Let's hope that's the truth.
What's next? What this means for crypto depends heavily on who you ask. However, no matter which way you lean, this incident raises some objectively viable concerns in the areas of transparency and overlap as we've now watched multiple cracks result in dominos toppling across the crypto landscape. Take this related lesson on this topic and earn Dibs 🟡 while you're at it: | | | |
INVESTING What We've Learned so Far From Q3 Earnings | | | | Earnings season is important to investors of varying pedigrees. Whether you're an active casual investor, investing for retirement, or even managing a large fund, company earnings are some of the market's richest news of the year, and a key driver in market sentiment. It's like the holiday season, except well… it happens four times a year. Some insights from Q3 - The slowdown: Earnings growth is undergoing a pretty stout curtailing heading into 2023, and we can't say that isn't to be expected. With overall GDP slowing and debt coming at a cost now, companies are tapping the brakes on growth efforts, and earnings are reflecting this.
- Losses are local: Some sectors have demand that's much less elastic than others, rendering them somewhat inflation-proof, even beneficiaries in some cases. Good examples so far have been energy, food and healthcare to name a few. Some are able to pass on the costs to their customers, while others suffer the consequences. And some businesses lose out on higher financing costs while others bank on it. In other words, losses are local, and this is how we get record-high earnings from energy companies and losses for tech.
- Margin resilience: With record inflation, higher wages, and heightened interest payments all on the docket, it seemed like a safe presumption to say margins would get crunched more so than they have. Margins are down 130 basis points in 429 of the 500 S&P 500 members, but it's unevenly spread, and certain sectors like energy are enjoying greater margins than before.
- Job losses are coming: While this isn't directly earnings related, the job losses we're anticipating in 2023 reflect the slowed growth referenced above. We're expected to see upwards of 500,000 jobs be shaven off the labor market next year, and layoffs have already ensued in certain sectors.
Going into next year All-in-all, it's a mixed bag here. Different businesses will respond to economic hardships and changes in different ways, with some even benefiting from them. Right now, earnings aren't exactly what's driving the market, but rather the economy and some emotions. Take this related lesson on this topic and earn Dibs 🟡 while you're at it: | | | |
FEATURING STACKIN | | | | Budgets, like diets, don't work for everyone. Instead, Stackin focuses on helping you do the emotional work of finding what you truly value. Then, they provide insights to help you understand the connection between your emotions and your money, so you can reach your goals. Start today by taking this money relationship quiz for free on Stackin. | | | |
BUDGETING & SAVING Savings Bonuses Galore | | | | Just like credit card companies offer cashback rewards and sign-up spending bonuses knowing that they'll sometimes be taken advantage of by savvy savers, banks are doing the same thing with savings bonuses. What's happening exactly? Bonus churners are earning thousands of dollars just by opening up new bank accounts at various banks simply to get new account sign-up bonuses, which are anywhere from $100 to $2,000 per bank. What to know before you start bonus churning - Traditional brick-and-mortar banks may not offer competitive interest rates on your deposits, but they sure are stepping it up on the bank bonus front right now. It seems as if these traditional players (i.e., Citi, Chase, BofA, Capital One, etc.) have all decided to show a united front against the many neobanks that were born in the recent bull market.
- Read the fine print: It should be known you can't just dine and dash for the bonus at these banks. Most of them will require a minimum balance, or at least that you keep the account open for a minimum period of time to avoid forfeiting your bonus. Reading the fine print on that offer is key.
- Don't forget the taxes: Bank bonuses are taxed as earned income, so don't forget to check for and download your 1099 for your bonus cash come tax time.
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🔥 TODAY'S MOVERS & SHAKERS | - Bath & Body Works (+19.4%) after raising their full-year earnings forecast; the company that sells soaps, lotions, fragrances, and candles is getting ready for the holiday season ($$) and laser-focused on expense and inventory management.
- Macy's (+12.2%) after the retailer reported better-than-expected revenue and profit today, while raising its future earnings forecast.
- Norwegian Cruise Line (-8.2%) after the cruise-line operator's stock was downgraded two levels from outperform to underperform by Credit Suisse for a number of reasons, one of which includes valuation.
- S&P 500 Index (-1%) to $3,920.59 (1D)
- Bitcoin (-0.2%) to $16,613.30 (1D)
- Ethereum (-0.6%) to $1,207.58 (1D)
This commentary is as of 8:45 am PDT. | | | |
🌊 BY THE WAY | - 📉 Answer: There have been 13 recessions since 1945, occurring about six years apart on average. Excluding the Great Depression, US recessions have lasted an average of about 10 months (Hartford Funds)
- 👉🏽 Treasury yield curve points to recession with the end of Fed hikes uncertain (S&P Global)
- 🔎 ICYMI. What's a yield curve? (Finny)
- ✨ Tom Ford's $2.8 billion deal to sell his fashion brand to Estée Lauder makes him a billionaire (Forbes)
- 🪙 Finny lesson of the day. With 2023 fast approaching, brush up on your capital gain & loss tax knowledge:
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| Finny is a financial wellness platform on a mission to make your money work for you. The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance & investing insights and money trends. The content team: Austin Payne, Carla Olson, Chihee Kim. Finny does not offer investment and stock advice. Please support our brand sponsor—Stackin—as they make rewards on our platform possible. If you're interested in sponsoring The Gist, please reach out to us. And if you have any feedback for us, please contact us. | | | | | | | |
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