Weekly Good Reads: 5-1-1
Fed Chair Signals, Crypto (un-)Excitement, Agricultural Impact on Environment, Softer Landing
Welcome to another issue of 5-1-1! I am Marianne O, writer of The Learner’s Mind on investing, economy, and wellness ideas. In this weekly, I will include 3 links to relevant economic and investment news, 1 link to finance, and 1 to wellness/idea pursuit based on what I read (5 links). I will also include 1 important chart and 1 investment term to know. You can easily subscribe to my newsletter by clicking below.
Fed Chairman Powell signalled yesterday at a Washington conference he could pause the Fed Funds rate hike (currently at 5% to 5.25%) in June: “Having come this far [considering tighter credit conditions-ed.], we can afford to look at the data and the evolving outlook to make careful assessments.”
This week, despite the S&P500 rally of 1.65%, U.S. 2-year government yield rose 27bp to 4.268% while the U.S. 10-year yield rose 20bp to 3.67%. The YTD U.S. stock price rally has been attributed to a rise in earnings expectations, lower bond yield, liquidity effect, the Fed’s emergency lending, and even generative AI optimism.
The fitful U.S. debt limit negotiations added to the bond market's jittery. Currently, both the U.S. gross federal debt and debt ceiling are at $31.4 trillion. Note raising the debt ceiling only ensures the finance of already legislated spending (not future spending.)
Many economists call for abolishing the debt ceiling as periodic negotiations can lead to worst fiscal outcomes. Failing to raise the debt ceiling has adverse consequences for the U.S. and global markets. The U.S. currently is the ONLY country that has debt ceiling negotiations that can threaten economic conditions.
Elsewhere, Turkey’s incumbent President Recep Tayyip Erdogan looks likely to win the second round of runoff, leading to continued weak currency and loose monetary policy in Turkey. The G-7 Summit communique is likely to suggest “constructive and stable” relations with China even as they pushed ahead with steps to reduce dependence on Beijing for critical supply chains, according to Bloomberg. Chinese stocks still carry the label of being “uninvestable” according to this explainer.
Next week on Friday watch for the Fed’s preferred inflation indicator (the personal consumption index ex-food and energy).
Economy and Investments:
The Promise of Crypto Has Not Lived Up to Its Initial Excitement (Economist or visit here)
How to Invest in Artificial Intelligence (Economist or visit here)
The Future of EM Is Worth the Weight (Jason Hsu on LinkedIn)-I agree with his evaluation of the “myths” of EM investing and the way forward.
Finance/Wealth:
Saving is For the Poor, Investing is For the Rich (Nick Maggiulli @Of Dollars and Data)
Bonus: The Spectrum of Financial Dependence and Independence (Morgan Housel from Collab Fund)-He identified 16 levels of financial independence-where are you at?
Wellness:
This Is The Most Fun Way To Make Your Life Awesome (Barking Up The Wrong Tree) - wisdom from the author of the book “Range”, David Epstein (also on Substack.)
One Chart You Should Not Miss: The environmental impacts of food and agriculture
Know the tremendous impact of agriculture and food waste impact on our environment. Growing food that goes to waste ends up using up to 21% of freshwater, 19% of our fertilisers, 18% of our cropland, and 21% of our landfill volume. Throwing away a kilogram of beef is equivalent to throwing away 50,000 litres of water.
Term(s) to Know: Soft Landing vs. Hard Landing
As the Fed has hiked interest rates aggressively in the past year, the debate whether or not the U.S. economy will end up in a hard landing (recession) or soft landing (rates rise just enough to curb inflation without a recession) has continued.
A good read comes from
latest piece: A Softer Landing on a Longer Runway? The bottom line is wage growth, thus consumer spending growth, albeit slowing, is still too high for inflation to come down to the 2% target while market indicators such as corporate bond spread are not calling for any recession. We may have a longer runway to any economic contraction.Please do not hesitate to get in touch if any questions! If you like this weekly, please share or subscribe to my newsletter.