To The Moon

My investing muse

The market and economy are in some contradiction. The market is going up & yet the economy is breaking under the weight of debt. Some people are living in different realities. Our world is shaped by different perspectives. We are all biased & speak from where we stand.

Credit Card Debt

Is the market’s growth financed by debt and leverage? With household credit card debt over $1 trillion and an average of 21% credit card interest rate, the average household has an average debt of over $10,000. For those under the weight of debt, the Fed pivot does not come early enough. Add the recent student loan payment resumption, there should be more reduction in disposable income for the families.

With the recent record sales over the Black Friday and Cyber Monday weekend, US consumers seemed to defy the odds by tanking the market with strong consumption. My consideration would be the amount of spending via credit, debt or Buy Now Pay Later (BNPL) schemes.

Creditworthy Gap

This leads me to the next point. Creditworthiness is an important tool to protect both consumers and banks. Should someone have perpetual credit issues, these would be flagged and the risk exposure would be limited.

However, BNPL does not share data within the community or the credit rating companies. Thus, the banks and BNPL partners could be issuing loans of higher risks. This lack of visibility can have issues when insolvent customers continue to enjoy lines of credit via BNPL.

Affirm is one of the players in the BNPL space. While they have enjoyed strong revenue growth from $264M (2019) to $1,588M (2023). They have yet to break even and in fact, their losses have continued to grow from $102M (2019) to $982M (2023). Their operating losses are not trending in the right direction. We should monitor defaults and their expenses. These could be one of the sectors greatly affected during a downturn.

Portfolio Balancing and Tax Loss Harvesting

December is also the time for portfolio balancing and tax loss harvesting. Thus, we can expect some movement (especially in the sell-off) in the coming days.

Conclusion

The market has seen record highs in their indices and several companies. Yet, the supply chain is sending signals of slowdown, layoffs and business closures. Supply Chain is the leading indicator of the economy and I do recommend monitoring this sector closely.

The consumer, business and federal government are addicted to debts. Who else is able & willing to fund the deficit of the biggest economy in the world, and for how long? Can the US fund multiple war fronts perpetually? The Q4/2023 earnings season will be upon us in about 2 weeks. Let us consider some hedging.

@TigerStars

$S&P 500(.SPX)$

$Affirm Holdings, Inc.(AFRM)$