Weekly Rundown: The Sky is Falling
Good morning and welcome to today’s edition of the Weekly Rundown, bringing you the latest on the financial markets, our economy and technology. With 10,000+ subscribers and counting, I’ve received so much positive feedback, mostly to say that these newsletters have saved you all hours of time in reading the news each week. So share our little newsletter with a friend - they’ll thank you :)
The stock market continues to rally while the economy appears to be collapsing before our very eyes. Next month’s job report will likely show that for the first time since World War II, the majority of the American workforce is unemployed. Some estimates indicate that it will take $10 trillion in stimulus to fully repair our economy after the damage that this pandemic has caused. The U.S. GDP in 2019 was recorded at 21.43 trillion. That means that the potential stimulus required to fix this could be up to half the size of the entire American economy. Let that sink in.
On May 17th, Federal Reserve Chairman Jerome Powell’s interview on 60 Minutes was aired.
A few highlights:
The economy will continue to struggle in the second quarter
“So the level of economic activity is going to decline substantially in the second quarter... But it's going to be a sharp decline by any measure. And, really, without precedent. And let's remember though that this is something that we're doing as a society, really, to protect ourselves from the virus.”
The economy is fine otherwise. (Debatable.)
“This is not because there was some inherent problem; a housing bubble or something like that, or the financial system in trouble. Nothing like that. The economy was fine. The financial system was fine. We're doing this to protect ourselves from the virus. And that means that when we do that, when the virus outbreak is behind us, the economy should be able to recover substantially. And I expect that it will recover substantially, but that it will take some time.”
Powell explains how money is ‘printed’
“We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.”
Most millennials (including myself) might not realize this - but the current fiat experiment is a little under 50 years old, since we officially let go of the gold standard in 1973. History has shown that every time we’ve seen a sharp increase in money supply, this has, in turn, resulted in inflation and economic havoc. It is unclear if this current time will be different. The relative strength of the U.S. Dollar is working in our favor, with 79.5% of all world trade currently conducted in US dollars.
This Week By The Numbers
Stocks post steady gains this week across the board, while Bitcoin and Gold experienced a modest correction. The market will be closed Monday for Memorial day.
Top Stories of the Week
New National Security Law ends Hong Kong’s independence
Hong Kong's Hang Seng Index (HSI) dropped nearly 5.6% on Friday after news broke that Beijing would move to pass a hugely controversial national security law in the Asian financial hub. The news — which could be the biggest blow to Hong Kong's autonomy since its handover to China in 1997 — also further stoked tensions between China and the United States. Friday's close was the Hang Seng's worst performance since July 2015. Read Full Story.
SoftBank values WeWork at $2.9 billion, down from $47 billion a year ago
SoftBank founder and CEO Masayoshi Son said his investment in WeWork was “foolish.” The comment comes as SoftBank gave WeWork a valuation of $2.9 billion as of March 31, based on a discounted cash flow method, down from $7.3 billion as of Dec. 31. WeWork’s private valuation was as high as $47 billion before its botched IPO last year. SoftBank had long been heralded for its savvy and splashy investments. The firm built its name on a massively successful bet on Chinese tech giant Alibaba. Read Full Story.
Neo-bank Aspiration raises $135M in Series C funding round
Aspiration, the fintech startup that’s brought a socially and environmentally conscious twist to the burgeoning realm of digital banking, has sealed a $135 million Series C funding round. Existing venture capital investor, Alpha Edison, led the round and was joined by UBS O’Connor, DNS Capital, Radicle Impact, Sutter Rock and Social Impact Finance. Aspiration intends to use the funds to further grow its services and product offerings, which are currently used by more than 1.5 million customers. Read Full Story.
U.S. Lawmaker Proposes Legislative Groundwork for National Blockchain Strategy
On Tuesday, U.S. House Rep. Brett Guthrie (R-KY) introduced a bill calling on the Federal Trade Commission to survey the prevalence of blockchain technologies across industry, government and the globe. If passed, the bill, which had no cosponsors when referred to the House Energy and Commerce Committee, would give the FTC two years to conduct the survey and a further six months to advise Congress on what it learned. Read Full Story.
Andreessen Horowitz Forecasts Fourth Crypto Bull Cycle
Pulling from “anecdotal” evidence and data going back 10 years, a16z says “price innovation cycles” – including those that peaked in 2011, 2013 and 2017 – begin with price increases that attract new people with bright ideas who end up creating promising companies and projects that benefit the space overall. Ethereum was created in the 2013 cycle, for example, and that became the foundation for the ICOs that drove the next cycle in 2017. Just three weeks prior, the VC firm said its new Crypto Fund II exceeded the initial $450 million fundraising target and would launch with a total of $515 million to invest in the space. Read Full Story.
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Thank you for reading the latest edition of the Weekly Rundown. As always, reach out with feedback and ideas for the next edition!
Best,
Tatiana Koffman —> tatiana@tatianakoffman.com
Disclaimer: This email does not contain financial advice and was created solely for informational purposes.