Dear friends
In October, markets continued to face many economic challenges and uncertainties. Increasing interest rates, the strong dollar and decelerating consumer spending impacted corporate earnings. In addition, US inflation was still too high, so investors started pricing in another Federal Reserve rate hike in November.
While some still hope that inflation may return to normal within a year, it will likely take quite a bit longer due to the tightening of monetary policy by major central banks around the world.
Except for Apple, the big four tech companies Amazon, Alphabet, Meta and Microsoft all posted disappointing results and lost a total of $350 billion in market value within a week.
Meta alone wiped out $230 billion in one day, a new record in U.S. stock market history, when it was revealed that its virtual reality division was burning through more than $3 billion per quarter. But CEO Mark Zuckerberg, who just lost a quarter of his own net worth, was unshaken and even plans to increase spending on his Metaverse in 2023.
In Europe, the UK faced major turmoil with inflation at a 40-year high and the economy down
0.3%. Hoping to calm the markets, new Prime Minister Rishi Sunak quickly reversed policy decisions made by his predecessor Liz Truss just two weeks earlier. On top of that, the ECB doubled European interest rates in October to 1.5%, the highest level since early 2009.
This, in turn, forced the Japanese central bank to intervene again on the currency markets with $42.8 billion to stabilize the yen. But unless it reconsiders its cautious monetary policy, this is likely to be virtually impossible in view of the Fed’s and ECB’s commitment to raise interest rates even further.
Nevertheless, there was a quick relief rally at the end of October due to a slightly better-than-expected U.S. GDP report. As a result, the Nasdaq closed at 3.9%, the S&P 500 at 8.0%, 20-year bonds at -6.2%, gold at -1.8%, and Bitcoin at 5.5%.
Our strategies were somewhat cautious but closed all in the green as well with Universal at 0.5%, Progressive at 0.5%, and CryptoMax at 0.6%.
Apart from Meta’s meltdown, October was marked by another big deal in social media.
With the news that ‘The bird is freed’, Elon Musk officially bought Twitter for $44 billion on Oct. 28 after much speculation and litigation. As the new self-proclaimed ‘Chief Twit’, he fired the top three executives including half the staff on day one and announced an $8/month plan for Twitter with user verification and priority visibility. Some are of course concerned about Musk’s motives, while others are hoping for more freedom of speech on the platform.
Given the uncertainty over Zuckerberg’s Metaverse strategy and the announcement by Jack Dorsey, Twitter’s original founder, to launch the beta testing of his decentralized social media project Bluesky, only time will tell what the future of social media will look like. But it’s certainly an interesting sector to watch.
And by the way, if you’ve always wondered what to do with your Bitcoins, you now have one more option: in the sunny Swiss city of Lugano, McDonald’s has officially started accepting cryptocurrencies as payment for its burgers and fries!
But before you run off and spend your Bitcoins on fast food, reflect on the story of Laszlo Hanyecz, who proudly bought two Papa John’s pizzas for 10’000 BTC on May 22, 2010. Today, a bit more than twelve years later, that would be a value of over $200 million! As you can see, fast food might not only be bad for your health but also bad for your wallet….
Stay happy, healthy and wealthy!
Omar