Image: https://images.wsj.net/im-741845?width=460&height=307 After regulators unusual moves Sunday evening to guarantee all deposits in the collapsed Silicon Valley Bank and Signature Bank and to provide additional capital to other distressed institutions, First Republic Bank was at the forefront of a Monday fall in bank shares. After falling 33% the previous week, First Republic shares in San Francisco dropped 61.8% on Monday. The declines occurred despite the Federal Reserve's announcement on Sunday that it had established a new Bank Term Financing Program, which will provide banks with loans for up to a year in exchange for Treasuries or other high-quality collateral. Also, the central bank loosened restrictions on its discount window. First Republic said on Sunday that the Federal Reserve and JPMorgan Bank had provided it with extra liquidity. In addition to any money it would receive from the new Fed facility, the bank said that the move increases its unused liquidity to $70 billion. Businesses and wealthy individuals make up First Republic's clientele, and many of them were no longer willing to put their money in low-yield accounts when there were other high-interest options available. Investors are now fearful of unrealized losses that have accumulated at banks since a deposit boom during the pandemic that prompted many to take sizable bets in bonds have now subsequently fallen in value due to the Fed raising interest rates. “First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,” said founder Jim Herbert and CEO Mike Roffler in a statement. Among the top banks, JPMorgan increased 1%, while Citigroup and Morgan Stanley declined by around 1.5%. About 2% was lost by Bank of America and Wells Fargo. Written by: Massimo Scaccia Sources: https://www.cnbc.com/2023/03/13/first-republic-drops-bank-stocks-decline.html https://www.wsj.com/livecoverage/stock-market-news-today-03-10-2023/card/bank-stocks-halted-amid-selloff-0hEyaXecb4xJQJl3rPpP?page=1

Image: https://www.kob.com/news/business-money/supreme-court-to-hear-challenge-to-consumer-agency/ A legal challenge is threatening the Consumer Financial Protection Bureau, which is the Bureau that protects consumers from unlawful financial services practices. The Supreme Court has agreed to resolve a lawsuit that was brought up by certain business groups. Late last year the agency's funding structure was ruled unconstitutional by a federal appeals court, which threatened its ability to function. The bureau is directed by the Federal Reserve because it doesn't get funding from the annual budget process in Congress. The budget capped at 12% of the total operating expenses from the Federal Reserve and received about $640 million in 2022. The bureau enforces consumer protection laws on issues like credit cards, mortgages, and student loans. The funding structure of the bureau was designed to protect it from any political influence that there might be. Business interests have looked to diminish the bureau's influence ever since it was first created. Since then, it has faced various legal challenges going against it. Solicitor General Elizabeth Prelogar, who represents the bureau, says, "The appeals court decision threatens to inflict immense legal and practical harms on the agency, consumers, and the financial sector as a whole." This case will be decided in the court's next term in October. Lenders have argued that the bureau must be funded with appropriations that are approved by Congress and that there are legal defects with the bureau's new payday rule. Lenders are urging the court to not take the case because they believe the present impact of the regulation is limited because mostly restrained by a Louisiana Federal Circuit Court. Written by: Nate Birck Sources: https://www.kob.com/news/business-money/supreme-court-to-hear-challenge-to-consumer-agency/ https://www.nbcnews.com/politics/supreme-court/supreme-court-takes-challenge-consumer-protection-agencys-funding-rcna69375

Image: https://www.cnn.com/travel/article/scariest-roller-coaster-drops-world/index.html Riding on a roller coaster requires you to have a strong stomach to tolerate the twists and turns. Sometimes, people will leave the roller coaster feeling nauseous because they couldn’t handle the intensity. Other times, people will feel invigorated by it. Funny enough, roller coasters are a great analogy for what investors deal with on a daily, monthly, and annual basis. Many investors attribute success in the markets to stock-picking, and that successful stock-picking comes from having the knowledge of when to buy and sell a certain security. However, Peter Lynch, the famous mutual fund investor, would disagree. “In the stock market, the most important organ is the stomach. It's not the brain." What does Lynch mean? Well, to start investing wisely, it’s best to know your pain tolerance for volatility in the markets. To avoid getting nauseous, it’s best to choose the rollercoaster that you can handle instead of choosing one that’s too intense for your liking. Similar to investing, it’s best to choose the correct asset and stock allocation that you can handle to stay invested instead of making the classic, fear-driven mistake of selling low. For example, if Nick can’t tolerate the intense ebbs and flows of the stock market, it’s probably best for him to lower his stock allocation and increase his bond allocation to have a less volatile portfolio. Having a better understanding of pain tolerance will allow an investor to weather through the worst conditions and be prudent in the best conditions in the markets. Ultimately, the biggest advantage an investor can have is staying invested, since the S&P 500 has averaged a 10% return per year while long-term government bonds have returned 5%-6% annually. So, although contrary to popular belief, having a strong stomach to stay invested in the rollercoaster of the markets is a far better tool than having a brain that can pick the best stocks. Sources: https://finance.yahoo.com/news/legendary-investor-peter-lynch-cautioned-112559183.html https://money.cnn.com/retirement/guide/investing_bonds.moneymag/index3.htm

Image: https://www.wsj.com/livecoverage/stock-market-news-today-02-27-2023/card/stocks-face-competition-from-rising-bond-yields-b2sQz5cXsUgbwM4F7x5Z As interest rates continue to rise, the bond market is beginning to catch up to the stock market. US 1 year treasury bonds have nearly met this year's returns in the S&P 500, making them a significantly more competitive option during the current volatility of the stock market. Just a year ago today the 1 Year Treasury bond returned 1.08%. Since then bond yields have been increasing significantly, and the current yield has jumped to 5.05%. The closing gap between stock returns and bond returns makes bonds a very attractive offer to investors. The bond market is much less risky than the stock market, especially Treasury bonds, which are guaranteed to be paid back by the federal government. The only case where these bonds wouldn’t pay back is if the US government defaulted on its debt - a highly unlikely scenario. The increase in bond yields is a stark change up from the past decade of Treasury bond returns due to low interest rates. Since 2007, the Fed has maintained very low interest rates given the economic impacts of the Great Recession. After just a few years of it slowly rising back up, rates were virtually cut back to zero after the Covid-19 pandemic. In the past year though, due to heavy inflation, the Federal Reserve has been hiking up rates which has now caused the Treasury bonds yields to increase. At the same time, the stock market has been in a major bull run over the same period. Over the past ten years, the S&P 500 has returned 12.4% annually, more than the benchmark's historical average. Much of this is due to the recovery from the 2008 financial crisis, the booming of the tech sector, and the aforementioned lax monetary policy from the federal reserve. Given the stock markets high performance, and treasury bonds low yield, the past decade has seen many moving away from bond markets and investing more into stocks; however, the recent contractionary monetary policy from the federal reserve could change that going forward, and investors should consider the risks and benefits of investing in stocks and bonds. Sources: https://www.wsj.com/livecoverage/stock-market-news-today-02-27-2023/card/stocks-face-competition-from-rising-bond-yields-b2sQz5cXsUgbwM4F7x5Z https://ycharts.com/indicators/1_year_treasury_rate#:~:text=1%20Year%20Treasury%20Rate%20is%20at%205.05%25%2C%20compared%20to%205.03,day%20and%201.08%25%20last%20year https://tradethatswing.com/average-historical-stock-market-returns-for-sp-500-5-year-up-to-150-year-averages/#:~:text=of%20S%26P%20500-,The%20historical%20average%20yearly%20return%20of%20the%20S%26P%20500%20is,including%20dividends

U.S. stock indexes took a big hit on Friday, February 24th after an inflation gauge might lead to a stronger-than-expected raise in interest rates soon. The heavy tech-weighted Nasdaq composite fell 1.8%, The S&P 500 dropped 1.5%, and The Dow Jones Industrial fell 1.3%. All three of these decreases in price will lead this holiday week in the red even though there were big gains Thursday. The stock market had a tremble in the month of February with a constant change in inflation. There has been positive growth for the U.S. economy but there have been concerns on what is the next move for the Fed and if they will keep interest rates higher at a steady level to keep inflation under control. With the economy being on a positive outlook, investors are giving up on the fact that the Fed will be quick to lower interest rates once it has finished raising them, said David Donabedian, chief investment officer at CIBC Private Wealth US. The economy has been adaptable in this tough time with high-interest rates that many investors didn’t expect, but they are hopeful that Fed will be able to keep inflation under control and keep the economy in a good state without causing too much damage. Written by: Jeffrey Nugent Sources: https://www.wsj.com/articles/global-stocks-markets-dow-update-02-24-2023-22044596

Image: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.wealthmanagement.com%2Findustry%2Fcambridge-launches-tool-formalizes-advice-sharing&psig=AOvVaw33JE0EclPPdcxiRruSgbGp&ust=1677547234082000&source=images&cd=vfe&ved=0CBAQjRxqFwoTCPCYzsnEtP0CFQAAAAAdAAAAABAJ With the support of Cambridge's new Private Client Solutions service, the 3,800+ financial advisers at the company will be able to address the needs of high- and ultra-high net worth customers by drawing on the firm's collective experience. The Cambridge advisors can presently access the service from the Iowa-based independent broker/dealer, which is a part of the company's Client Solutions platform. The company wants to support advisers in providing customers with advice that goes beyond investment management and includes other types of knowledge they might require based on their situation, such as business solutions, tax and estate planning, and cash management. Prior to its official debut earlier this month at Cambridge's Circle of Excellence conference in Boca Raton, Florida, the company started a soft launch in 2022. That comes after the debut of Cambridge's RetireTRAC in October 2022, a tool for advisor growth and retirement planning created in partnership with Nettuno Group that aids advisors in determining their customers' preparation for retirement. Jeff Vivacqua, president of growth and development at Cambridge, gave the example of a small business owner with large assets who would need counsel on investment management. But, Vivacqua wants advisors to be able to draw on the expertise Cambridge has amassed while operating in a sector with its own brisk M&A pace if the company owner wishes to buy a rival. Vivacqua said that the simplicity of the product may assist advisers in keeping clients from seeking services from other companies and even losing them entirely. “Without that, they’re left to go search in different directions for hopefully the ideal solution,” Vivacqua said. “It’s a way to help them narrow that funnel and work with them to connect the dots." Written by: Massimo Scaccia Sources: https://www.wealthmanagement.com/industry/cambridge-launches-tool-formalizes-advice-sharing

By: Jeff Nugent After a brutal year for the stock market, executives at financial firms are having conversations regarding cutting costs in this harsh economic state. Many top companies’ CEOs are having to take drastic pay cuts. The Chief Executive Officer of Goldman Sachs Group, David Solomon was the most recent to take this strike. He is taking a pay cut of approximately 30% to $25 million, which is much lower than his 2021 compensation of $35 million. Goldman Sachs's full-year earnings dropped by nearly 48%, resulting in a decrease of $11.3 billion compared to 2021. Such a significant drop in earnings will force companies to lay off employees. Goldman Sachs was forced to cut back its workforce and lay off 4,000 workers, one of their biggest rounds of layoffs ever. Tech giant Apple Inc has avoided many layoffs but has announced this month that its CEO, Tim Cook will take a pay cut of 40% to $49 million for 2023. Another big tech company, Amazon Inc will have to cut 18,000 jobs globally due to shares being down by nearly 50%. Amazon CEO, Andy Jassy will earn $175,000 per year in base salary, with most of his compensation being awarded in stocks. Ultimately, his compensation will drastically decrease after a rough year for Amazon shareholders. Drastic pay cuts hurt not only the chief executive officer of these companies but also the average employee, as thousands are being laid off across the globe. Sources: https://www.bloomberg.com/news/articles/2023-01-28/goldman-morgan-stanley-ceos-take-pay-cuts-as-others-get-raise-despite-layoffs?leadSource=uverify%20wall https://www.wsj.com/articles/goldman-sachs-cut-ceo-david-solomons-pay-to-25-million-in-2022-11674837409?mod=Searchresults_pos1&page=1

Image: https://www.architecturaldigest.com/story/full-house-home-for-sale The average renter in the US is now rent burdened, according to a new report from Moody’s Analytics. This means that the typical renter pays 30% of the median household income on rent, a number which has gone up substantially in the past few years. The “rent burdened” definition comes from the United States Department of Housing and Urban Development, which states that households that are rent burdened may have trouble affording other basic necessities, such as food and transportation. These figures are up from previous years, as in 2019 where the rent to income ratio was 27.2%. It would later drop in 2020 to 25.7% due to less demand from Covid-19, but now with inflation and said demand coming back, people are spending more of their income on rent now more than ever. During the Pandemic, many major cities saw a decrease in their populations due to lockdowns and remote work. This led to major shifts in populations as people moved out to find homes with more space. As cities have recovered from the pandemic though, demand has skyrocketed back up and now we have seen a reverse of what happened in 2020. In New York city for example, the rent to income ratio is at a staggering 68.5% - the highest in the country. Image: https://www.forbes.com/advisor/mortgages/real-estate/why-houses-are-expensive/ Another reason for increased rent prices is the lower supply of housing. Between 1968 and 2008, the average number of homes constructed every year was 1.53 million. But after the 2008 financial crisis, many construction companies went out of business and many others were hesitant to reinvest back into the industry. In the time since 2008, the average number of homes constructed per year has decreased 39%, with only 936,000 homes being built each year. The amount of people renting has gone up in the past few decades as well. In 1999, just 22.5% of Americans were renters according to Moody’s Analytics. Today, Pew Research finds that about 36% of Americans are now renters. So this increase in rent is now impacting more people than ever before. Sources: https://www.architecturaldigest.com/story/full-house-home-for-sale https://www.nytimes.com/2023/01/25/realestate/rent-burdened-american-households.html https://www.forbes.com/advisor/mortgages/real-estate/why-houses-are-expensive/ https://www.pewresearch.org/fact-tank/2021/08/02/as-national-eviction-ban-expires-a-look-at-who-rents-and-who-owns-in-the-u-s/

Source: https://www.nytimes.com/2023/01/11/us/politics/debt-ceiling-economy-congress.html On Thursday, The US hit its debt ceiling as Republicans and Democrats in Washington failed to reach an agreement on an increase. The federal government will no longer be able to borrow funds in the short term in order to finance its operations. In the meantime, the Treasury Department will be using intricate accounting measures in order to ensure the government does not default on its debt. All of this is coming as a result of Congress’s inability to agree on whether to increase the debt limit. The current ceiling that has been hit remains at $31.4 trillion, coming after 2022, which saw a $1 trillion deficit. House Republicans have held out on the vote in order to see more cuts to government spending in exchange for increasing the debt ceiling. Both sides have remained firm in their positions as of now. Republicans have vowed that without any concessions, they will not increase the ceiling. On the Democrats side, President Biden has continued to assert that the cap should be lifted with no strings attached. The costs of the United States defaulting on its debt would be severe. In America alone we would see an immediate and harsh recession. It would mean the Treasury Department couldn’t pay out Medicare benefits, social security benefits, military salaries, and tax refunds. It would also mean they couldn’t pay back bond holders of US T-bonds, which have historically been seen as one of the lowest risk investments in financial markets. If this were to happen, investors would lose a lot of trust in the USs ability to repay its debt, which would mean higher interest rates for the US to borrow money. This would make it even harder for the US to repay its debt going forward into the future. It would also hurt the global economy as a whole, as countries have become more interconnected and globalized, a country as big as the US defaulting would mean many other countries being very negatively impacted and possibly having recessions of their own. The United States defaulting on its debt would be historic. The country has never truly defaulted on its debt, and so many view the likelihood of the U.S. actually defaulting to be very low. This is something that has been echoed by Republican senate minority leader Mitch McConnell, as he has recently stated that he is not concerned that the U.S. will default, and that a compromise will eventually be reached. Sources: https://www.nytimes.com/2023/01/19/us/politics/debt-limit-economy.html https://www.cnn.com/2023/01/18/politics/debt-ceiling-deadline-congress/index.html https://www.nbcwashington.com/news/local/what-is-the-debt-limit-and-what-happens-if-the-us-defaults/3257735/#:~:text=Economists%20say%20consequences%20of%20a,NBC's%20Alice%20Barr%20reports

Written By: Abdullah Al-Ejel The long-awaited global soccer event officially debuted in Qatar on Sunday, November 20th. As the biggest soccer event in the world, there is an immense amount of investment, and culture participation from 32 nations, which leads one to wonder how much of an economic impact there is on the lucky country selected to host it. Positive Effects The positives that entail hosting the world cup is a surge in tourism, sales, and infrastructure investments. In addition to participating locals, tens of thousands of people travel in from all over the world, purchasing services from local businesses in transportation, hospitality, food and more. Consumer spending contributes to uplifting business owners, which in turn drives more economic activity across the country. Hosting is also good news for those who are unemployed or in search of new opportunities. Every world cup, new stadiums must be built to accommodate for fans, as well as improving existing stadiums. In the 2010 world cup, South Africa “created 130,000 construction jobs… and as a whole indirectly resulted in a gain of 415,000 jobs” (Bruegel). These jobs then lead to heavy investments into improved transportation and security. Below is an example of Brazil’s spending into their infrastructure, similar to most host countrys’ spending habits: Russia and Qatar have also built new railway systems, bringing on positive long-term investment in public infrastructure, and providing more reliable transportation to its citizens. Negative Effects/Backlash While positive gains are present, countries can overspend on infrastructure, run the potential risk of long-term debt, and lose opportunities due to media backlash. Many host countries are left with “massive debt and constructions that serve little use after the World Cup comes to a close” (CNBC). Citizens typically criticize spending decisions, arguing that it could have alternatively been used for people who need it most. This sort of dilemma argument is common during big spending projects. Qatar has spent roughly $229 Billion on this world cup, making it the most expensive world cup in history. Hopefully, revenues from ticket sales and advertising can help them break even and not put them into immense debt. When all attention is focused on you, it’s inevitable that the media will work to point out imperfections and issues. This ranges from disagreements from political disagreements all the way to pointing out humanitarian rights & issues. For example, Russia and Qatar have committed or been accused of worker exploitation during the process of building toward the world cup. This can pose a risk of potentially ending partnerships or boycotts, and can even lead to a bad look for business partners to not boycott the event. Notable controversies in Qatar included criticism of LGBT rights and worker deaths. Many teams and social activists have protested Qatar, discouraging some people from attending and news outlets badmouthing the event, which can hurt potential ticket sales and revenue. Sources: https://constructiondigital.com/epc/world-cup-2018-how-russia-has-transformed-its-infrastructure https://www.middleeasteye.net/news/qatar-world-cup-brands-sponsors-navigate-controversy https://www.weforum.org/agenda/2018/06/world-cup-football-smart-investment-russia-host/ https://www.bruegel.org/blog-post/world-cup-economics

Image: https://www.nytimes.com/2022/11/13/world/europe/russia-kherson-ukraine.html This month, Ukraine has taken back the key city of Kherson in its efforts to retake land under Russian occupation. The retaking of the city is part of Ukraine's continued counteroffensive, which saw them taking back land to the North back in September. The loss of Kherson, which Putin declared part of Russia just weeks ago, shows the inability for the Russian military to make progress in a war which was seen to be an easy victory to the Kremlin. Now with the war looking closer to an end with Russian forces retreating out of parts of the country, the question remains: what will the aftermath of the war look like in terms of relations between the west and Russia? After the invasion of Ukraine, there were major sanctions put in place against Russia by western nations. Major Russian banks were banned from the Swift financial system. There were outright bans on Russian gas from countries like the United States, Canada, and Britain. Even countries that are heavily dependent on Russian gas began punishing Russia. Germany, whose biggest source of gasoline comes from Russia, halted construction of their Nord Stream 2 pipeline. Russia has been preparing for punishment from western powers for years now, ever since the 2014 invasion into Crimea. Back then they created the Eurasian Economic Union, which was seen as their version of the European union. They have also begun selling more gas and other goods to countries like China and India, who benefit from cheap Russian gas. And so, with all of these things considered, it seems like the post war world in Ukraine may be much different in terms of how western countries and Russia engage with each other. Even if sanctions are lifted, they will be hesitant to work with each other with one another. Many US companies have closed down their Russian locations, and new gas trade relations with other countries have been set up in preparation for the lack of energy coming from Russia. Even if the war were to end tomorrow, the world is unlikely to go back to its previous state of trade relationships. Sources: https://www.nytimes.com/2022/11/11/world/europe/kherson-ukraine-russia.html https://www.theguardian.com/world/2022/sep/13/ukraine-reclaim-control-of-kharkiv-and-towns-seized-at-onset-of-russian-invasion https://www.swift.com/news-events/news/message-swift-community https://www.reuters.com/business/energy/who-is-still-buying-russian-crude-oil-2022-03-21/ https://www.reuters.com/world/europe/how-much-does-germany-need-russian-gas-2022-01-20/ https://www.investopedia.com/terms/e/eurasian-economic-union-eeu.asp https://www.nytimes.com/article/russia-invasion-companies.html

BlockFi, a leading cryptocurrency lender and exchange, filed for chapter 11 bankruptcy protection this past Monday. This comes two weeks after the crash of FTX token and FTX exchange. BlockFi works similarly to a regular bank. An individual or business will come and request a loan, except instead in of dollars, the loan funds are often in cryptocurrency. The company was backed by Fidelity, Akuna Capital, SoFi, Coinbase, and many other large companies. Its aim was to “redefine banking”. Some investors are learning a difficult lesson about investing in non-securities and the lack of regulation surrounding crypto. Following the catastrophic failure of FTX, it’s important for investors to know what a security is. The Howey Test The Howey test aims to test whether something is a security or not. It consists of four prongs, which must all be satisfied for a product to be considered a security: 1. There is an investment of money Many courts have also moved to a broader ‘investment of wealth’ instead 2. The investment is made into a “common enterprise” Broadly, this means that either the investor’s fortune (investment) is linked to the efficacy of the efforts and successes of the company seeking the investment. 3. The investors expect to make a profit This portion of the test considers the investor’s intent for purchasing an asset. They could either be trying to profit, or they could be trying to store their wealth. If they are simply trying to store their wealth, the asset would likely be defined as a currency 4. Any expected profits are due to the actions of a third party or promoter This portion separates the investor from the third party. “If the investor has a significant hand in the success of an investment, it’s most likely not an investment.” There are three main types of securities: equity - which provides ownership rights, debt – which is typically a loan repaid with periodic payments; and hybrids – an instrument that combines some aspects of both debt and equity. Any public sale of securities is regulated by the SEC. According to the Howey Test, Cryptocurrencies do not qualify as a security. It’s important that in the future, investors should consider whether the instrument they are investing in has proper protections and is understandable. Hopefully, investors will be more cautious in the future. Written by Jacob Patterson Date: Tuesday, November 29th, 2022 Sources: https://www.lawinsider.com/dictionary/common-enterprise https://www.businessinsider.com/personal-finance/howey-test https://www.investopedia.com/terms/s/security.asp https://blockfi.com/mission/ https://coinmarketcap.com/currencies/ftx-token/ https://www.cnbc.com/2022/11/28/what-to-know-about-crypto-investor-protections-as-blockfi-files-for-bankruptcy.html