HUIG's 3 Things this Week: Nov 11


1. US Inflation Cools (FT)

With annual consumer reports showing signs of inflation cooling off, markets rallied. Upon the announcement of the news, indices like the S&P 500 experienced an increase of about 5%. This rally was a result of investors' expectations, as they hope for smaller and smaller interest rate hikes. The logic goes as follows: if inflation cools down enough, then the FED will no longer have to maintain their strict interest rate hikes, and that should be good for businesses in general, mainly because it reduces borrowing costs for major corporations and business around. Overall, this is a good start. Afterall, that is the whole point of the interest rate hikes. However, it may be a little premature to celebrate- hope for the best but plan for the worst.


2. FTX debacle (WSJ, FT)

Earlier this week, one major cryptocurrency exchange, Binance, sought to acquire another major exchange, FTX. This potential acquisition was due to FTX's shaky financials. However, upon further investigation, it appeared that FTX's financials were far more dire than expected. Thus, as Binance taps out, FTX is left to embark on their own quest to raise funds. If they don't, they look to disappoint many of their clients and backers. This is notwithstanding the unfortunate fact that this entire debacle is currently unraveling with the unfavorable backdrop of the declining value of Bitcoin- which is currently trading at below $17,000. With major crypto exchanges on the brink of a collapse, and Bitcoin's major downfall from its peak, fewer and fewer people are capable of conjuring up the power to HODL (Hold on for Dear Life).


3. Layoffs after Layoffs (WSJ)

As of these last few weeks, some technology companies that have announced either a halt in their hiring or a plan to initiate layoffs include the following: Meta, Netflix, Tesla, Shopify, Twitter, Amazon and Salesforce, to name a few. With a less than ideal economy up ahead, many companies are starting to brace themselves for the recessionary storm. Furthermore, like with most things in Economics, this like is likely to create a cycle. With more people unemployed, productivity is expected to decrease and so will the potential for growth. Thus, all we can hope for today, is that this period is brief, and that the following boom shall be glorious but sustainable.


 

Bibliography


Lahart, J., & Forman, L. (2022, November 10). Layoffs aren't a good look for Big Tech's growth story. The Wall Street Journal. Retrieved November 12, 2022, from https://www.wsj.com/articles/layoffs-arent-a-good-look-for-big-techs-growth-story-11668045118?mod=hp_lista_pos1


Osipovich, A., & Yu, E. (2022, November 11). FTX founder Sam Bankman-fried scrambles for money with options dwindling. The Wall Street Journal. Retrieved November 12, 2022, from https://www.wsj.com/livecoverage/stock-market-news-today-11-10-2022-cpi-report-october-inflation/card/after-failed-binance-deal-crypto-exchange-ftx-will-try-to-raise-funds-sam-bankman-fried-tells-employees-LbEXVJM7LylLSCkRmO0w?mod=hp_lead_pos1


Smith, C., & Duguid, K. (2022, November 10). US inflation cools to lowest level since January. Financial Times. Retrieved November 12, 2022, from https://www.ft.com/content/1d93c771-ee91-40a6-a878-be120d59f43c


Waters, R., Aliaj, O., Langley, W., Oliver, J., Ho-him, C., & Fontanella-Khan, J. (2022, November 10). FTX on brink of collapse after Binance abandons rescue. Financial Times. Retrieved November 12, 2022, from https://www.ft.com/content/593cad86-683c-4444-ac7b-c5c875fb4d95


Image retrieved from https://www.npr.org/2022/11/10/1135755585/inflation-prices-october-stocks-economy

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