To The Moon

My Investing Muse (01Jul24)

Layoffs & Closure news

• KPMG to cut further 200 UK jobs amid market slowdown - FT

• 60% of U.S business is likely to have layoffs in the second half of 2024, according to a new ResumeTemplates survey of 934 business leaders. And of this number, nearly half anticipate reducing 30% or more of their total headcount. - Forbes

• "The world and the industry are rapidly changing around us. After careful consideration, Melt Bar and Grilled has decided to file Chapter 11 bankruptcy. This gives us the best opportunity to reorganize and rebuild the company." - The Street

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Layoff & closure news continued into the week.

US household stock allocation

This is taken from X user The Kobeissi Letter’s recent post:

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US households' stock allocation as a percentage of financial assets hit a new record of 41.6% in Q1 2024. This is up from 30.5% in 2020 and even higher than in the 2000 Dot-Com bubble peak of 38.4%. Since the 2008 Financial Crisis, household participation in stocks has more than DOUBLED. Since then, the Nasdaq has rallied 1,738% and the S&P 500 is up 702%. Since October 2023 alone, the Nasdaq and S&P 500 have seen40% and 32% gains, respectively. Households are benefiting from the historic run in stocks.

As society improves with education, there are more citizens who take up passive income like investments. This is possible thanks to education and the advancements in various investing and trading platforms.

Instead of putting excess income into traditional assets like savings in the bank, more are willing to put these into various investing instruments that include bonds and equities. Indirectly, the families will also gain more risk exposure from market volatility. The impact of the market rises and falls would be more widespread and strongly felt due to the bigger pool of retail investors. I recommend due diligence and education so that we understand the risk profile and avoid overleveraging.

US Banks stress test

Article is taken from a recent CNBC news article

31 major banks stress test 2024. Higher hypothetical losses stem from “Substantial increases” in credit card balances & higher delinquency rates; riskier corporate credit portfolios; and a combination of higher expenses & lower income from fees. - Business Times

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Total unrealized losses of $516.5 billion were $38.9 billion higher than the previous quarter. Higher unrealized losses on residential mortgage-backed securities drove the increase, as mortgage rates increased in the first quarter according to a recent FDIC update.

With the annual Federal Reserve stress test for 31 major banks claiming success, there remains concern for the banks that are not part of the 31. The exposures to home and personal loans weigh heavily on the regional banks. The stress test needs to be conducted across the board so that the country is aware of the current status of the banking sector. It is likened to asking the rich families in the neighbourhood whether they felt the impact of inflation. The result of such a survey would be very different if it were done mainly with the lower income bracket families. There remain concerns for the banking sector especially with the news of debts and major losses from various commercial real estate sales.

My final thoughts

This is one of my recent contemplations.

During a recession, wealth is not lost, just re-distributed.

We have read reports of how the richer demographics have gained much more wealth compared to that which is lost by the lower income bracket after the COVID-19 pandemic. What can the common folks do to protect or grow the wealth that they have accumulated? With more of us entering the stock market, it is important to be trained and to do the necessary due diligence.

With every investment there would be risk, it is important for us to understand the market so that we are able to best take advantage of the different positions and opportunities available.

There is troubling debt amassing in America. Consumers, corporations and the Federal government have their share of debt. While debts have always been around, the growth of these debts is concerning. The interest paid to service the federal deficit has exceeded the budget that we have allocated for National Defense.

For the First Time, the U.S. is Spending More on Debt Interest than Defense

The above is taken from a recent 23 May 2024 article by Council on Foreign Relations.

Market tops and corrections are part of the economic and market cycle. Let us consider some hedging given the recent developments.

@TigerStars

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