Your Financial News Roundup
June 28, 2023
1. Economy: The housing market is rebounding; while corporate defaults are rising due to high interest rates.
2. Tech: The Supreme Court upheld CalTech’s win against Apple and Broadcom over patent rights infringement; meanwhile Thomas-Reuters bought an AI-legal tech startup for $650M.
3. World: Russia’s Wagner Group launched an armed rebellion that abruptly ended; and JP Morgan paid a $290M settlement to Jeff Epstein’s victims.
Personal Finance Concept [Part 1/4]: Overcoming Limiting Money Beliefs
🏚️ A Resilient Housing Market: Even as mortgage rates hover around 7%, the housing market is proving to be resilient. While home prices fell nationally last year due to the Fed’s rate increases, they have quickly rebounded in recent months. As homeowners who refinanced or bought when interest rates were at all time lows in 2020 and 2021 cling onto their homes, young people are continuing to bid on houses (sometimes making all-cash offers). Meanwhile, builders are capitalizing on the lack of inventory with new construction. (New York Times)
Our Take: Despite higher borrowing costs, the market has regained its momentum. Many Millennials are in their peak years for buying a home, which will buoy demand and incentivize builders to alleviate the supply shortage.
💣 Going Belly Up: 41 companies defaulted in May, contributing to a total of 324 bankruptcy filings for 2023 as of June 22. Notable companies, such as Envision Healthcare, Silicon Valley Bank, Bed Bath & Beyond, and Diamond Sports, were among those that declared bankruptcy. Due to rising debt capital costs, credit rating agency Moody’s expects the global default rate to reach 5% by April 2024. Higher interest rates have made it difficult for firms to refinance without increasing their debt burdens. (CNBC)
Our Take: Companies typically try to fix their financial status first before resorting to declaring bankruptcy, making the default rate a lagging indicator. It’s safe to say that the surge in corporate bankruptcies will continue as long as the Fed keeps raising interest rates.
🍎 A Blow to Apple: The Supreme Court shot down an appeal filed by Apple and Broadcom in a billion-dollar patent infringement case brought and won by the California Institute of Technology. Caltech sued the tech giants back in 2016 for patent infringement related to signal encoding/ decoding systems used in Apple devices that rely on Broadcom WiFi components. In 2020, a U.S. District court jury found that the patents were indeed infringed and awarded Caltech over $1.1B in damages, with Broadcom ordered to pay $270.2M and Apple to pay $837.8M. (Reuters)
Our Take: While Apple and Broadcom failed to get the patent infringement ruling itself overturned, they succeeded in getting a new trial on the damages. That means they are not yet on the hook for the $1.1B owed to Caltech, who also sued other tech giants for similar reasons, including Microsoft, Samsung, Dell, and HP.
🧑🏽⚖️ Your AI Lawyer: As part of its “build, partner, and buy” strategy, Thomson-Reuters is acquiring AI legal tech startup, Casetext, for $650M. Reuters is spending billions to acquire AI-tech firms to enhance its major business lines in news and white-collar services. Backed by ChatGPT-4’s tech, Casetext’s main product is CoCounsel, an AI that helps analyze contracts, review documents, and create legal research memos. Casetext has 10K+ customers and 82% of lawyers report that AI could be used in their work. (TechCrunch)
Our Take: Reuters is one of many companies targeting niche AI products to bolster its already existing service lines. The true value of AI comes from specialized models merged with a niche company’s dataset.
⚖️ A Ghost’s Debts: Last week, Jeff Epstein’s victims asked a federal judge to approve a $290M settlement offer from JP Morgan to address the big bank’s role in Epstein’s operations. While JP Morgan had financed Epstein’s operations, which included sex trafficking, it’s unclear if bankers were aware of his activities. Epstein died in 2019 in prison under mysterious circumstances, though it was ruled as a suicide. Other entities, including Deutche Bank, have paid millions in settlements related to Epstein’s activities. (NBC)
Our Take: It’s unlikely that the full details of Epstein’s activities will be revealed, but a number of elites are known to be linked to him. A lawsuit brough by US Virgin Islands alleges that senior executives of JP Morgan had close ties with Epstein and were aware of his illicit activities, indicating they likely protected this monster.
🇷🇺 The Coup That Almost Was: Over the weekend, Russian private military contractor, The Wagner Group, and its leader, Yevgeny Prigozhin, launched an armed rebellion against their own government. Prigozhin claimed the Russian military bombed his forces, leading him to send his army of mercenaries into Russia and capture the city of Rostov and its military HQ. Turning towards Moscow, Prigozhin’s march ended when the leader of Belarus arranged a deal between Prigozhin and Putin. Prigozhin would go to Belarus and not face criminal charges while his forces would get amnesty. (BBC)
Our Take: The rebellion’s effects are unclear, but Putin’s standing has suffered both at home and abroad, revealing the weakness of the ruling power structure. The war could tilt in Ukraine’s favor as the more effective Wagner fighters potentially get removed from the battlefield.
Finance Concept of the Week
The Psychology of Money [Part 1/4]: Overcoming Limiting Money Beliefs
Money holds a lot of power over our lives, extending beyond financial security to shaping our mindset and emotions. It plays a key role in meeting our basic needs, from housing and groceries to vacations and entertainment, which can create anxiety for some and offer peace of mind for others.
Regrettably, most people have an unhealthy relationship with money. Many of us have limiting money beliefs that act as roadblocks in our financial and personal growth, such as:
“Money is the root of all evil.”
“Rich people are greedy.”
“I’m bad at money.”
These are all broad generalizations that can create a fear-based mentality that manifests these thoughts into reality. You may find yourself involved in self-sabotaging behaviors, such as overspending, racking up tons of debt, and avoiding taking calculated risks because of these types of toxic beliefs. This can then undermine your confidence and hold you back from achieving financial success. By identifying and challenging these beliefs, you can form a healthier relationship with money and live the life you want.
Examining the Roots of Limiting Money Beliefs
Our upbringing heavily influences our money beliefs, including parental influences, socioeconomic background, and early childhood experiences. Societal norms, media messages, and cultural experiences are also factors that can shape how we think about money.
For example, if you grew up in poverty, that can lead you to develop a scarcity mindset. You may feel like you are always behind, your bills are piling up, and you have to say yes to opportunities that do not serve you because you are afraid another one won’t come. This can lead to poor financial decisions, mental health problems, and not getting preventative healthcare, which fuels your scarcity mindset even more.
Overcoming Limiting Money Beliefs
Knowing that limiting money beliefs can lead to a host of problems, we need to challenge their accuracy and relevance to our present circumstances. Reflect on your thoughts, emotions, and behaviors around money. Pay close attention to negative self-talk or conditioned perceptions not grounded in reality.
Expand your financial knowledge so you can make informed decisions. For example, surround yourself with people who have healthy money mindsets, whether through mentors, friends and family, or online communities. Listen to podcasts about personal finance and economics. Read books like Rich Dad Poor Dad or The Psychology of Money.
Once you have a strong financial foundation, consider your financial goals and how they align with your values and aspirations. Setting specific and measurable goals can help you foster a sense of purpose and motivation. Designing budgeting, saving, and investing strategies can reinforce these positive beliefs and help you break free from limiting patterns.
Tip of the Week
💸 If thinking about money makes you stressed, consider adopting mindful spending. Mindful spending is a conscious and intentional approach to managing money. It involves developing awareness of your finances, considering the impact of your spending habits on your overall well-being, and making purchases that align with your values and goals.
Personal Finance Resources
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