Stocks Set to Drop
Headline: This week’s bounce in tech stocks was erased Thursday, sending the Nasdaq down 2.5% and the S&P 500 down 1.4%. The Nasdaq ended Thursday nearly 8.7% lower than its November all-time high, nearing correction territory. The S&P 500 and the Dow finished 3.3% and nearly 2.3%, respectively, away from their all-time highs last week.
Bottom Line: The threat of higher interest rates hits high flying growth stocks the hardest as they depend on abundant, cheap capital to finance innovation.
Big Banks Fall After Quarterly Results
Headline: JPMorgan, other bank earnings continued to roll in, with Wells Fargo on Friday posting better-than-expected fourth-quarter revenue. Shares fell nearly 2% in the premarket.
Citigroup shares fell more than 3.5% on Friday after the banking giant reported a precipitous profit slide for the fourth quarter. The company’s net income dropped 26%. Citigroup cited an increase in expenses for the sharp decline.
Bottom Line: Volume slides and costs increasing. Bank stocks should be priced in healthier profit margin spreads on the prospect of rising rates.
December Retail Sales Anemic
Headline: The big drops came against a backdrop of shoppers spacing out holiday buying earlier this year due to supply chain concerns as inflation soared. This week, December’s consumer price index rose 7% year over year, matching estimates and the quickest pace since June 1982.
Bottom Line: Scarcity increases cost and erode buying power. The simple math here is we are in a cycle of negative real interest rates. If the target real long-term rate target is 2% and the CPI is 7%, your dollar is only really worth 95 cents. But of course, the CPI number does not include autos. The real-time inflation rate is rumored to be closer to 15%.
Biden to Nominate Sarah Bloom Raskin as Vice Chair for Supervision at Fed
Headline: President Joe Biden will nominate Sarah Bloom Raskin to be the Federal Reserve’s next vice chair for supervision, arguably the nation’s most powerful banking regulator, according to people familiar with the matter. Biden’s choices for the Fed leadership positions come as central bankers are expected to hike interest rates multiple times this year after tapering concludes. There’s also talk about how to start reducing the Fed’s balance sheet.
Bottom Line: The Fed’s loaned America about $9,000,000,000,000. They are coming for it and it’s gonna sting.
Supreme Court Blocks Biden Vaccine Mandate for Businesses
Headline: Disappointed by the ruling on businesses, the president called on states and companies to voluntarily institute shot requirements to protect workers, customers, and the broader community. On the healthcare workers' part of the ruling, Biden said it will save the lives of patients, doctors, and nurses.
Bottom Line: Who the hell knows!
One Thing to Forget
I’m not a fear-monger or a panic broker but ignorance is no defense. All of this is unfolding in real-time right in front of our faces. It’s a lot to take in but ignore these deleterious influences at your financial peril. Wouldn’t it be nice if you could compartmentalize all this crap and get back to 8 solid hours a night? Well, you can.
Senior life settlements are a fixed income alternative that can offset many of the risks one faces owning stocks and other volatile assets. Life insurance asset-backed securities provide surety in an otherwise wildly unpredictable economy that most of us have never experienced.
Unlike virtually any other asset class, you know the profit margin on your investment in a diversified portfolio of life settlements the day you buy it. That’s invaluable if managing the risks coming at you is important, and it should be.
If balance in your asset allocation is what you seek to achieve, life settlements should be part of your overall portfolio. Just buy it and…Forget about it.