OTW #54: Tech layoffs so far, Who owns all the Bitcoin?, and more.
Important financial stories to check out over the weekend
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1. Major tech layoffs in 2024 (so far).
Visual Capitalist charted the major layoff rounds that have happened across the tech sector. They included the raw numbers and the percentage of the company that was laid off so far this year.
Antagonist’s take
Investors are watching employment figures even closer than normal because those numbers play a major role in the Fed’s interest-rate decisions.
Let’s not forget, however, that these aren’t simply numbers on a page. These are real people who no longer have jobs and who could very well be struggling now. Therefore, you’ll never catch me celebrating data that shows more people are out of work.
As far as the Fed goes, the central bank has 2 mandates:
Keep prices stable (i.e., control inflation).
Maintain maximum employment.
But what happens when those 2 mandates are mutually opposed?
For example, what if controlling inflation leads to major job losses? Or what if increasing employment also causes prices to rise?
Fed Chair Jerome Powell already said last year that he would favor controlling inflation over saving jobs—even if it meant 2 million people would get laid off.
Therefore, if investors think that rising unemployment will force the Fed to cut rates, they’re mistaken—at least while inflation remains high.
Of course, the wild card in this scenario is that it’s an election year in the U.S. And, contrary to what the central bank would have you believe, the Fed is most certainly political. And that fact only makes their job harder.
Rising prices coupled with rising unemployment would spell disaster for any sitting president, regardless of his/her party.
If we see inflation continue to remain sticky and the economy bleeding jobs, look for politicians to turn up the heat on Powell. He’ll then be in an unenviable position: raise rates and kill jobs, or cut rates and ignite inflation.
The rest of this year will be interesting to say the least.
2. Who owns all the Bitcoin?
Despite all the headlines about major institutions jumping on the Bitcoin bandwagon, individuals are still the primary holders of the cryptocurrency.
Oktay Kavrak provided this analysis:
There are about 19.1 million Bitcoins in existence. And there will only ever be 21 million in total.
Here’s an overview of Bitcoin holdings in companies (publicly traded & private), ETFs and countries:
1) ETFs: 837,098 BTC
2) Private companies: 477,640 BTC
3) Countries: 451,968 BTC
4) Public Companies: 278,403 BTC
5) Bitcoin Miners: 39,589 BTCThey collectively own 2,045,109 BTC - which is worth $80.1 billion or 9.74% of the 21 million.
Antagonist’s take
While I don’t talk much about crypto in The Antagonist, I have owned Bitcoin and other coins for several years. They comprise a small portion of my portfolio—enough to enjoy the benefits of a rally but not enough to financially ruin me.
For many, the long-term dream is that Bitcoin becomes a major (or maybe the major) currency in the world. I can’t predict if that’ll happen or not. As of today, however, the price is too volatile to serve that purpose.
Because of this, treat Bitcoin like any other highly speculative investment or trade. Risk only what you can afford to lose, and be ready for some wild swings.
If that’s not appealing to you, don’t sweat it. There are plenty of other investments that can make you solid profits without roller-coaster-like volatility.
3. Delinquency rates: good or bad? It depends…
This is a good example of how financial headlines about the same topic can vary from “doom and gloom” to “not bad at all.”
Charles-Henry Monchau, chief investment officer at Syz group, published the below chart and commentary. He claims that rising credit card delinquencies could be signaling a recession.
The delinquency rate for credit card loans in 2023 has risen sharply, which, based on historical patterns, suggests that the economy might be heading towards a recession.
Antagonist’s take
The rising rate of delinquencies looks concerning at first glance, particularly when placed in the context of recessions.
That’s only part of the story, however.
If you analyze this same topic from a different data perspective—the absolute rate instead of the rate of change—you can see that the delinquency rate is quite low.
This next chart is from the St. Louis Fed’s FRED database. It shows the delinquency rate on credit card loans from all commercial banks going back to 1991 (the first year data is available):
Yes, the delinquency rate is rising, but that’s to be expected.
First, we moved from historically low interest rates to the fastest rate hikes in history. That’s bound to hit people hard.
Second, as you can see from the chart, the delinquency rate is very low relative to where it’s been over the last 30 years.
I’m not suggesting that you outright dismiss the spike in delinquencies. This may very well turn out to be an early indicator of economic woes.
My point is simply that headlines never tell the whole story, and they often leave out other important data points that you should consider.
Last thing...
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Thank you for reading, and have a great weekend!
Jason Milton
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Just an update on the daughter’s portfolio. Based on the Papabear guidance we sold VIOV (small cap) and bought VTV (large cap value) today, last trading day of the month.
I appreciated your commentary on bitcoin. When we started this financial journey with the girls in 2020, cryptocurrency was prevalent on their social media channels. We set up Coinbase accounts and bought some BT and ETH as part of the highly speculative part of their portfolio. We bought it 2021 and it was painful until it wasn’t. We are talking $50 and $100 respectively for each girl. Every family bet I make is in Bitcoin. Clemson beat (the spread against)GT in football last November and it cost me $25 I BTC plus fees. I’m reinforcing the gambling nature of the product but also growing their balance.