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5 tips for riding out a downbeat market this holiday season

The market doesn’t look like it’s going to spike upward anytime soon. While you wait, grow your network and position your portfolio to take advantage of…

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The market doesn't look like it's going to spike upward anytime soon. While you wait, grow your network and position your portfolio to take advantage of a future recovery.

These forecasts are driven by deteriorating structural fundamentals. For example, credit card debt has surged past even 2020 levels, with interest rates charged by banks that are just slightly higher than those observed leading up to the post-2000 dot-com crash. And yet, labor force participation rates — or the proportion of the population that is able to work and is working — have still not recovered to pre-pandemic levels. Furthermore, inflation — as measured by the consumer price index — has surged over the past few years.

Economic forecasts suggest that we are in for greater economic turbulence. The United States has been in a recession and that recession is expected to continue, with the Conference Board forecasting a further decline in gross domestic product (GDP) by 0.5% in Q4 of this year. It also anticipates that the recession will continue into at least Q2 of 2023. That was before the collapse of crypto trading platform FTX, which had profound downstream effects on investment portfolios and non-crypto companies. Other more optimistic forecasts, such as those of the Federal Reserve Bank of Philadelphia and S&P Global, are just barely positive for 2023 at 0.7% and 0.2%, respectively.

Consumer Debt & Interest Rates in the United States, 1995-2020. Source: St. Louis Federal Reserve
Labor Force Participation in the United States, 1950-2020. Source: U.S. Bureau of Labor Statistics
Consumer Price Index, 2011-2022. Source: St. Louis Federal Reserve

These macroeconomic indicators are common outside of the U.S. too. Many – even the International Monetary Fund — have pointed out the increase in inflation as a result of higher energy prices in Europe, which is one factor, among others, that contributes to the European Union’s recent forecast of nearly zero GDP growth for all of 2023. That is on top of its already long-run demographic challenge that there are too many people aging out of the labor force and not enough new entrants, which has dire implications for GDP growth.

Related: The market isn’t surging anytime soon — So get used to dark times

While these macroeconomic fundamentals are outside your control, there is still a lot within your control. We need to remember that we have substantial agency over our lives and do not need to get dragged into an economic tailspin just because that’s what might be happening to the aggregate economy — we can still individually thrive during a famine.

Here are five tips for doing just that.

Optimize the wait. Make the best use of your time every day, which might mean picking up a new skill or taking up a freelance job that deploys your broader skill set. Especially with the emergence of artificial intelligence and automation, certain tasks are becoming obsolete and other new creative opportunities are emerging — and you can leverage that trend by acquiring the skills to perform these tasks. There are substantial mismatches in the demand and supply in certain parts of the labor market, such as artificial intelligence and cybersecurity jobs, so consider picking up a new skill that you can put to work.

Reflect and take inventory. It is far too easy to look at the circumstances we personally or as a society are in and get worried, but take stock of what is going right and what you’re thankful for. The holidays are an especially good opportunity to do so. By putting your circumstances in perspective, you avoid a lot of mental rabbit holes that could cause you to become more anxious and disappointed, which unfortunately only further amplifies challenging circumstances. Even when circumstances look bleak, remember what you have and what you have been through — it will inspire you to go on.

Grow your network. Building relationships is part of the adventure we are on. Focus on people as actual human beings, rather than potential doors of opportunity. People are indeed doors, but treating people in transactional ways warps your perspective of life and ends up closing those doors, because people do not like being treated as vending machines. (Would you like it if people only talked to you based on what you could give to them?)

Related: 5 reasons 2023 will be a tough year for global markets

Cherish small wins. We often focus on the big and flashy goals or aspirations, but overlook what is immediately in front of us. We have a lot more agency than we give ourselves credit for! Whether you are taking care of your property or writing an excellent report at work, demonstrating excellence in everything that you do creates a lot more optionality in the long run that yields truly fulfilling and fruitful employment opportunities.

Always carve out some proportion of your earnings for savings. Consider investing it in structurally sound digital assets. There is no substitute for setting aside resources every month, whether crypto or fiat, that you can draw on when you’re most in need. There will always be an element of unpredictability in the world, so view these savings as your insurance policy on market downturns. Even though crypto has been in a winter, all assets have been struggling because the entire market is in a downturn. But the future of the major tokens, such as Bitcoin (BTC) and Ether (ETH), remains hopeful, and it’s just a matter of time before they rebound. Moreover, as governments become more volatile and inflation continues to grow, crypto can be a useful hedge and diversification strategy.

Don’t despair even when the economy is faltering. You and your household can still thrive!

Christos A. Makridis is a research affiliate at Stanford University and Columbia Business School and the chief technology officer and co-founder of Living Opera, a multimedia art-tech Web3 startup. He holds doctoral degrees in economics and management science and engineering from Stanford University.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Energy is the master resource but it could be Bitcoin that reigns supreme

Nothing shines a light on the importance of energy as much as a fast-approaching winter.
The post Energy is the master resource but it could be Bitcoin…

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Nothing shines a light on the importance of energy as much as a fast-approaching winter. When the temperature drops, the scarcity of energy becomes obvious and global efforts to preserve it begin.

This year, the fight for energy is more aggressive than it’s ever been.

The fiscal and monetary policies set in place during the COVID-19 pandemic caused dangerous inflation in almost every country in the world. The quantitative easing that set out to curb the consequences of the pandemic resulted in a historically unprecedented increase in the M2 money supply. This decision diluted the purchasing power and led to an increase in energy prices, sparking a crisis that is set to culminate this winter.

CryptoSlate analysis showed that the E.U. will most likely be the one hit the hardest by the energy crisis.

The European Central Bank (ECB) has been struggling to keep core inflation down this year. The Core Consumer Price Index (CPI) began to increase substantially in 2021 due to the pandemic both in the U.S. and the E.U.

The U.S. has seen its Core CPI decrease sharply since its culmination in February and posted better-than-expected results last month. However, Core CPI in the Eurozone has continued to increase throughout the year and currently shows no sign of stopping.

Graph showing the Core CPI in the U.S. and the Eurozone from 2017 to 2022 (Source: The Daily Shot)

A similar increase in Core CPI can also be seen in Japan and the U.K. One of the factors that may have contributed to their monetary instability is a lack of investment and support for commodities like oil and gas. Widespread efforts to switch to renewable sources of energy led to a decrease in oil and gas purchases in the E.U. and the U.K.

In contrast, the U.S. and Russia have been investing heavily in oil and gas and promoting innovation in the field.

Looking at the value of fiat currencies against the U.S. dollar further confirms this impact.

The Russian Ruble and the DXY have both increased in value in the past two years, while the euro, British Pound, and Japanese Yen have all seen their Dollar value decrease.

global fiat currencies
Graph showing DXY, GBP, EUR, JPY, and RUB and their value against the U.S. dollar (Source: TradingView)

With rising inflation and a seriously weakened currency, the E.U. will have a hard time competing for oil and gas on the global market. Natural gas producers warned that almost all long-term contracts for natural gas coming out of the U.S. have been sold out until 2026. Until then, when a new wave of natural gas supply is expected to come, the E.U. will have to compete with Asia for the limited supply and swallow the high gas price.

All of this uncertainty could have a positive effect on Bitcoin. While the broader crypto market struggles to remain afloat after the FTX fallout, Bitcoin has positioned itself as a pillar of stability in a market plagued with bad actors. Devalued fiat currencies could push retail investors away from safe-haven assets like gold and commodities and towards an asset like Bitcoin.

The post Energy is the master resource but it could be Bitcoin that reigns supreme appeared first on CryptoSlate.

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Schedule for Week of November 27, 2022

The key report this week is the November employment report on Friday.Other key indicators include the 2nd estimate of Q3 GDP, the September Case-Shiller and FHFA house price indexes, October Personal Income & Outlays (and PCE), the November ISM man…

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The key report this week is the November employment report on Friday.

Other key indicators include the 2nd estimate of Q3 GDP, the September Case-Shiller and FHFA house price indexes, October Personal Income & Outlays (and PCE), the November ISM manufacturing index, and November vehicle sales.

Fed Chair Powell speaks on the economic outlook, inflation and the labor market on Thursday.

----- Monday, November 28th -----

10:30 AM: Dallas Fed Survey of Manufacturing Activity for November. This is the last of the regional Fed manufacturing surveys for November.

----- Tuesday, November 29th -----

9:00 AM ET: S&P/Case-Shiller House Price Index for September.

This graph shows graph shows the Year over year change in the seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 14.4% year-over-year increase in the Composite 20 index for September.

9:00 AM: FHFA House Price Index for September. This was originally a GSE only repeat sales, however there is also an expanded index. The 2023 Conforming loan limits will also be announced.

----- Wednesday, November 30th -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for November. This report is for private payrolls only (no government).  The consensus is for 200,000 jobs added, down from 239,000 in October.

8:30 AM: Gross Domestic Product (Second Estimate) and Corporate Profits (Preliminary), 3rd Quarter 2022. The consensus is that real GDP increased 2.7% annualized in Q3, up from the advance estimate of 2.6% in Q3.

9:45 AM: Chicago Purchasing Managers Index for November.

Job Openings and Labor Turnover Survey10:00 AM ET: Job Openings and Labor Turnover Survey for October from the BLS.

This graph shows job openings (black line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in September to 10.717 million from 10.280 million in August.

10:00 AM: Pending Home Sales Index for October. The consensus is for a 5.0% decrease in the index.

1:30 PM: Speech, Fed Chair Jerome Powell, Economic Outlook, Inflation, and the Labor Market, At the Brookings Institution, 1775 Massachusetts Avenue N.W., Washington, D.C.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

10:30 AM: (likely) FDIC Quarterly Banking Profile, Third quarter.

----- Thursday, December 1st -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 235 thousand initial claims, down from 240 thousand last week.

8:30 AM ET: Personal Income and Outlays, October 2022. The consensus is for a 0.4% increase in personal income, and for a 0.8% increase in personal spending. And for the Core PCE price index to increase 0.3%.  PCE prices are expected to be up 6.2% YoY, and core PCE prices up 5.0% YoY.

10:00 AM: ISM Manufacturing Index for November.  The consensus is for 50.0%, down from 50.2%.

10:00 AM: Construction Spending for October.  The consensus is for 0.3% decrease in spending.

Vehicle SalesAll day: Light vehicle sales for November.

The consensus is for 14.9 million SAAR in November, unchanged from the BEA estimate of 14.9 million SAAR in October (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the current sales rate.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Friday, December 2nd -----

Employment Recessions, Scariest Job Chart8:30 AM: Employment Report for October.   The consensus is for 200,000 jobs added, and for the unemployment rate to be unchanged at 3.7%.

There were 261,000 jobs added in September, and the unemployment rate was at 3.7%.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The current employment recession was by far the worst recession since WWII in percentage terms. However, as of August, all of the jobs had returned and, as of September, were 804 thousand above pre-pandemic levels.

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Amazon, Walmart, Target, and Costco Make Key Holiday Moves

The big retailers have laid the groundwork that will be good for shoppers and investors.

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The big retailers have laid the groundwork that will be good for shoppers and investors.

Back when Black Friday meant people lining up outside of stores to battle for the hottest toys and cheap electronics, the holiday season sometimes produced a surprise winner. Maybe J.C. Penney had a good quarter because the traffic driven by more successful stores fed it customers or maybe an especially hot item powered an unlikely winner to a good season.

Now, for a variety of reasons, holiday retail has changed and in this (sort of) post-pandemic reality the best deals and biggest selection of in-demand items will be offered by retail's biggest players. Amazon (AMZN) - Get Free Report, Walmart (WMT) - Get Free Report, Target (TGT) - Get Free Report, and Costco (COST) - Get Free Report have all faced struggles over recent quarters, but they're still the best-positioned retailers for the holiday season.

That doesn't mean that niche players like Five Below (FIVE) - Get Free Report won't have a strong holiday season, some will, but 2022 will be a year where the strong get stronger and that's something both shoppers and investors should be aware of.

Shutterstock

The Supply Chain Benefits Big Retailers

Target and Walmart both had to admit some major supply chain and inventory issues this year. Both companies ended up with too many bulky items like televisions that sold well during the height of the pandemic. When demand slowed, both chains made the decision to sell off items that did not fit their holiday plans.

That was a painful decision in the short term, but customers certainly saw it as a positive, so there was added goodwill for both chains. More importantly, Walmart and Target have the money to not have to hold onto bad inventory in order to clear space for what will sell. 

Costco has a much more limited selection of inventory, which gives it the buying power to cut to the front of the line when supply is limited. The warehouse club gets what it wants simply because its orders are so big.

Amazon has had its struggles given the wildly varying demand caused by the pandemic. It too, however, used an added Prime Day as a way to clear its warehouses and rightsize its inventory for the holiday season.

All four of these companies have simply spent more on supply chain and inventory management than their rivals. That's always an edge, but it's a massive one this year.

Investors Take a Look at Big Retail

Analysts often use quarterly numbers to justify buying or selling a stock. Long-term investors ask questions like, "regardless of how the stock price moved, do I think this company will be a leader in its category for years to come?" It's hard to look at Target, Walmart, Amazon, or Costco and not think that will be the case.

That creates some interesting buying opportunities when you look at these stocks year-to-date:

  • Amazon: -44.76%
  • Target: -29.55%
  • Costco: -5.69%
  • Walmart: 5.37%

The market has punished all of these companies for macroeconomic problems they don't control. In most cases, margins have dropped because these retailers have selectively opted to not pass on higher prices fully to their customers.

That may be a balance sheet negative for a quarter or even a few of them, but it's a massive edge in the marketplace long term. As an investor, it's hard to imagine a world where these four companies don't continue their sales dominance, driven by having the ability to do customer-friendly things like maintaining value relative to the competition.

There might be a surprise winner this holiday season, but it's unlikely we see any surprise losers from this group.

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