Sunnybranch Wealth

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Weekly News Roundup

Midterms, midterms, midterms! Also, it finally stopped raining in Portland, inflation may be cooling down, and FTX claims the title for latest crypto meltdown with a potential $16 BILLION dollar loss for depositors. Happy Friday!

15 minute news recap podcast. Full transcript below.

00:00

Hi everyone, its Katherine here at Sunnybranch Wealth, hope everyone is having a great Friday. If you have the day off work for Veterans Day, I hope you are enjoying it especially. I'm gonna kick off at the top here with some exciting local and personal news. It has finally stopped raining here in Portland, obviously just in time for my two new pairs of waterproof shoes to arrive. So I am really looking forward to spending time outside this weekend with my daughter and getting some nature explorations in without having to bundle up in rain pants, rain jacket, hat and gloves.

 

00:46

I'm going to kick off the news this week by talking about the national midterm elections. I think a lot of you are following along pretty closely with what's going on here. So I won't do too deep of a dive. But as it currently stands, as I'm recording this on Thursday afternoon, the Democrats have probably lost the House but still have a narrow chance of hanging on depending on how the last 30 or so races that have yet to be called turn out. In the Senate, we are still waiting on results from Arizona, Nevada and Georgia, which is having its runoff on December 6, to see if Democrats or Republicans are going to have control over the Senate.

 

01:34

Overall, this was a much better performance than was expected from Democrats. We did not see the "red wave" that generally happens in midterm elections, a reaction against the the incumbent president and the incumbent president's party. It's interesting because Biden doesn't seem to be doing particularly well, he has extremely low approval numbers. But along with that, a surprisingly strong performance by the Democrats in this midterm. And it makes me really curious, which is a question that a lot of people are asking, is how much of an effect of abortion and specifically the overturning of Roe v. Wade had on these midterm votes. I wonder if Roe v. Wade wasn't overturned by the Supreme Court then would we see the same voting picture that we saw coming out of Tuesday?

 

02:34

It's interesting to pontificate about, we're never going to know the answer. I certainly don't think that Roe v. Wade being overturned was a good thing. But it is heartening in this moment of extreme partisan divide to see that there are people who are still able to tune out a lot of this this mess and this vitriol that we're seeing from politicians and focus in on the issues that really matter to them. Hopefully it means there's more positive news to come out of the political sphere over although I for one am not going to be holding my breath.

 

03:18

Turning to local Portland news. A couple of exciting results coming out of the midterm elections here in Oregon. The first being that Tina Kotek won the election for Governor of Oregon, narrowly heading off the challenge by Republican Christine Drazen. That was a really exciting result. I think it was the closest that a Republican has gotten to winning the governorship since 1987. Very glad that Kotek hung on and hopeful that she's going to be able to deliver on some of the promises that she made on the campaign trail.

 

03:58

I personally am also really excited that Portland voted to enact City Charter reform, which is the first major change to our city's governance structure since the early 1900s. What Portland voted on was to radically change the composition of the city council. Currently we have a four member City Council with each of those councillors also acting as an administrator over one or another of the city's bureaus. So this administrative responsible responsibility is going to be turned over to a professional city manager who is overseen by the mayor. This is a much more common form of government. It's what happens in most major cities. But charter reform is also going to make Portland extremely unique and that's because of the other piece

 

05:00

We voted on and that passed, which is that instead of a four city councilor city, with those four councillors being elected citywide, we are now going to have 12 city councilors, three each from four new districts that are going to be drawn. So we will have multi-member districts, and in these multi-member districts, the city councilors will be chosen with ranked choice voting. Portland is going to become the first city in the country to combine ranked choice voting with multi-member districts. It's exciting to be on the forefront of trying something new, especially if you're a person who believes, like I do, that the current city governance structure not working well, for Citizens of Portland. It's also severely lacking in representation and diversity. This new form of government should hopefully address a lot of those issues. It's going to be a very busy two years for the Committees that are tasked with figuring out all of the details of how these reforms are going to be enacted. But regular, Portlanders should just know that we are going to be voting on elections for the mayor, that new city auditor position, and all 12 council seats in November of 2024, which is also, as I'm sure many of you know, our next presidential election. So it's going to be an exciting election both locally and nationally.

 

06:46

In market news, stocks are up today on the news that inflation is moderating and actually cooled more than expected in October. For the year ending in October, inflation was up 7.7%, which was less than the 7.9% that was expected and significantly less than the 8.2% price increase from through September 2021 through September of 2022. What this shows us is that the combination of the Federal Reserve increasing interest rates, and also supply chain pressures easing may be working together to ease price increases.

 

07:31

As I talked about last week, the Federal Reserve is walking a tricky line in terms of knowing how much of an effect what it's doing now is going to have maybe in 3-6 months, this is a positive sign that the rate increases are working. It also increases the possibility that we're getting closer to that "soft landing" that the Fed is looking for, and avoiding a recession. But we aren't out of the woods yet. And the big reason for that is that non-housing prices, think about the things that we all spend money on like child care, pet care, health care, eating out, and other discretionary expenses, are closely tied to wage gains.

 

08:21

And wage gains have been increasing, not hugely, but fairly significantly and steadily over the past several months. So there is a very real fear that companies are going to continue to pass these rising labor bills on to their consumers for some of these more discretionary expenses, which would have the effect of continuing to prop up inflation. So the Federal Reserve isn't out of the woods yet, as I said. That's why in addition to watching these inflation numbers, they're also looking at the specific components of what is making up inflation, as well as wage growth reports and wanting to see those wage growth reports starting to moderate in the coming months before they indicate that they may start to be less aggressive than they have been in terms of raising interest rates.

 

09:23

I am going to take a little bit of a left turn now and talk about the FTX meltdown. For those of you that don't follow the crypto world at all. You may not know what I'm talking about. If you do follow crypto even nominally, you will have seen that one of the major cryptocurrency exchanges FTX had this week what amounted to a run on the bank that effectively left it with losses of almost all of its $16 billion in deposited assets.

 

10:01

I'm not going to go into technical details here because first off, I don't understand all of them. And second off, it would make this a much, much longer podcast, but basically the founder of FTX, Sam Bateman-Fried also founded a hedge fund called Alameda, and FTX and Alameda were engaged in some practices that were certainly risky may or may not be slightly or extremely illegal, but it involved FTX making a lot of loans to Alameda. When I say a lot, we're talking about $10 billion worth of loans, those loans were made from customer deposits. And then Alameda engaged in these risky trading practices, and potentially some questionably legal activities with regards to the relationship between FTX and Alameda, who again, were founded by the same person. And until and who until last year, were also run by Bateman-Fried as well.

 

11:15

The risk that FTX and Alameda were taking on by engaging in these loans to one another was called out in a report from Coindesk last week. After reviewing this report, it made other large crypto exchanges, specifically Binance, wary of holding FTT, which is FTX's token, and they announced that they were going to be selling it because they were concerned about the amount of risks that FTX and Alameda were taking on together.

 

11:49

When Binance said they were going to sell their FTT, this made other holders of crypto worried that the Binance sale would put pressure on FTX. And they all went to pull all of their deposits out of FTX, effectively causing a run on the bank. After literally $5 billion in asset withdrawals were requested on Sunday FTX shut down all withdrawals, and it is currently unclear if FTX depositors will be able to access any of their funds.

 

12:28

The primary takeaways that I would give to all of you, when talking about this space is to remember crypto was very hot, I still personally think there is a lot of potential in blockchain technology to be the technology of the future. But as it stands now, cryptocurrency as a whole is an unregulated asset class, which means that you should take caution and not rely on the promises that exchanges are making, in terms of the safety and the stability of the funds that you deposit with them.

 

13:03

The second thing I will say is that holding crypto and cold storage as opposed to on an exchange is always best practice and preferred. If you're actively trading crypto, this may not be an option. But consider if you have a very, very large crypto balance, how you can make that more secure through cold storage as opposed to hosting it on an exchange.

 

13:28

And the third thing I'll say, which is what I'm going to leave you with here today is that always remember if it seems too good to be true, it probably is. I cannot tell you how many people approached me with deals of 20% interest rates on staking their cryptocurrency and then these deals just evaporated. The funds they had put in just evaporated because these companies were over leveraged, they saw significant devaluations in some of their tokens. And there you go, there's nothing left.

 

14:05

So I hope none of you had significant funds invested with FTX I'm gonna leave all of you to enjoy your weekend. Have a good one.

KEYWORDS

FTX crypto, Portland charter reform, inflation, midterm elections, alameda, deposits, cryptocurrency, democrats, ranked choice voting, interest rates, news, governance structure