December 14, 2021

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TOGETHER WITH

Happy Tuesday to you. Can you guess how much the average US adult consumer plans to spend on themselves and their families this holiday season? a. $498, b. $998, c. $1598. Follow the wave 🌊 below for the answer.

Here are the money topics on the docket for today:

Time to cash out of the market or not?
Making passive income with crypto
Credit card tips for the holiday season

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INVESTING

Time to cash out or not?

After we all briefly feared for the worst during the pandemic flash crash in early 2020, the markets again proved to be overly emotional. The returns they've produced since that time are historic and more than enough to make those who might've sold out regret it.

Now, almost two years later, investors are faced with a different scenario. After such an unprecedented run in the markets, some are beginning to ask if this Goldilocks zone will soon be coming to an end, and they may be even considering cashing out.

The case for getting out

Expected slump: The recovery from our pandemic blip has been pretty robust, and this can be seen in numbers like GDP growth, consumer spending, and even inflation. Because of this, the growth we've been seeing was fueled in part by a rebound, and isn't expected to continue in perpetuity, so pricing in future upside is becoming tougher to rationalize. And for what it's worth, Goldman Sachs anticipates US GDP will grow 3.8% on a full-year basis in 2022—a figure that's down from the 4.2% clip it expected previously.
The Fed is out of ammo: The Federal Reserve can't do much more to continue propping up an economy after they've already engaged in extensive quantitative easing, stimulus, and rates kept to the bottom of the barrel. In fact, it's worth noting that the Federal Reserve's balance sheet has more than doubled since February of 2020, rising from $4.3 trillion to about $8.8 trillion by November 2021. Now, it seems increasingly likely that their next moves will be contractionary in an attempt to curtail inflation, and this is bearish to many.
Valuations are high: When the markets as a whole go on a bull run (with the occasional pullbacks) for over 20 months, valuations are definitely going to get stretched. At a certain point, it's fair for investors to ask if there's any upside left, or if a deeper correction is due.

The case for staying in

What's the alternative? Whether or not it's a good idea to stay in the market depends on your financial situation, stage of life, and countless other factors to consider. But, if you're like most investors and just hoping to get a decent return over the long haul, what other options do you have? Bond yields and savings account returns, in real terms, are negative. So if you don't need the cash any time soon, just hold tight.
Time in the market: We're all well aware that time in the market beats timing the market, for most investors anyway. So, if you're investing for your retirement like most of us are and have more than 5-10 years to go, what's the rush?
A sustainable recovery? Throughout our path to redemption from early 2020, profit margins have seemed to remain reliably high in spite of inflation and supply chain issues working against them at times. As long as things continue to slowly work towards returning to normal, it's reasonable to expect we'll continue to up our spending as time goes on, furthering the market's ability to continue trudging upward.

Ultimately, it's all about your strategy and position. If you're about to retire or have the opportunity to do some tax-loss harvesting, it might actually be a good time to cash out. Or, maybe you're holding some stocks that you know are at unsustainable valuations, that's a valid reason to take some profits too. But, if you're just dollar-cost averaging your way to your golden years, it's probably a good idea to sit tight.

CRYPTOCURRENCY

Making passive income with crypto

The phrase passive income is thrown around a lot when it comes to building wealth, and for good reason. Who wouldn't want to set themselves up for cash flow on auto-pilot?

Passive income has traditionally been associated with real estate investing or dividends earned from an investment portfolio of blue-chip names. But no matter how old-school or traditionally-rooted the idea is, it has a place in the budding crypto world too.

While it may not be appealing to everyone, it may be for those of you who are curious about crypto.

We'll plan to zoom in on more detail in future editions here, but for now, here are a few main ways you could make passive income with crypto:

Lending: It's about as straightforward as it sounds, and works similarly to how you'd lend in traditional finance, the only difference is that, well, you're lending out your crypto. Options range from peer-to-peer, decentralized, centralized to margin lending types (and we'll spare you all the details for today). Borrowers usually have large crypto positions they don't want to liquidate, so they'll put it up for collateral for the loan. Bottom-line: by lending out your crypto, you can earn interest.
Staking: Staking simply means that you're contributing some of your cryptos to keep the blockchain running smoothly. So when you 'stake' your cryptos, it's used to validate transactions on the virtual ledger. You're rewarded with interest for helping to keep the ledger running, and the amount of interest you earn will depend on how much you deposit and for how long your crypto is locked up.
Crypto savings accounts: Deposit your crypto in such "savings accounts" and earn interest in the crypto of your choice. Apps like BlockFi and others offer 9% APY, and sometimes more. Companies like BlockFi are able to pay interest because they are "generating returns in purchasing SEC-regulated equities and predominately CFTC-regulated futures and by lending crypto assets in the institutional market." But beware as there's no such thing as FDIC insurance offered on a crypto-based savings account, and you could lose your crypto.

🔎 Before you do anything though, study up on the platform—is it a centralized finance (CeFi) or decentralized (DeFi) institution, what security measures are in place, are there any insurance policies offered, who are their typical borrowers, and of course, the important specifics on account terms and conditions. All the usual stuff.

MONEY TIPS

Credit card tips for the holiday season

In case you weren't aware, credit cards are pretty cool. Sure, they definitely have their drawbacks if used irresponsibly, but when used for good they can be like the financial swiss army knife in your wallet.

Credit cards have a lot to offer, but you have to know what to look for first. So, during a time of year when millions of Americans are racking up expenses on them, we thought it would be timely of us to chime in with some relevant tips.

Purchase protection: You probably have this already but may not even be aware of it. Some cards offer insurance-like protection on purchases made that are damaged or stolen. Usually, the protection is offered up to a certain value amount and for a certain period of time after you buy it—usually 90 to 120 days.
Virtual card number: If you're worried about scammers getting a hold of your credit card number when making online purchases, check if your credit card issuer offers a one-time virtual account number. These numbers differ from your real credit card number and can usually be generated on the spot once you're logged into your account.
Cashback is king: Well, that's the case for at least 70% of us credit holders who prefer to earn cashback rewards, according to Discover. Using the best cashback credit card is a great way to max out your savings during the holidays.
Trip protection: If you're traveling this holiday, you know things can get complicated. If your travels run amok, you might have to cancel or worse yet, find yourself waiting on an airline's support line. Luckily, some credit cards actually offer trip protection if you book with the card, meaning you'll get reimbursed for canceling, whether the recipients refund you or not.
Welcome bonuses FTW: Welcome bonuses are great if you have a planned expense coming up. Many credit cards offer very relevant bonuses for spending on your new card, which is just perfect. When you were going to spend the money anyway, why not get paid for it?

📊 ASHU'S CORPORATE CORNER

Today's Movers & Shakers

Pfizer is about flat as the firm reported that its covid pill is 89% effective in preventing hospitalization and death in high-risk patients
Meme stocks aren't seeing much love: GME plunged 14% yesterday and is down 3% this morning; AMC slipped 6% in early trading after a 15% fall yesterday
Beyond Meat (+5%) was upgraded by Piper Sandler to neutral (from underweight)
Tesla (-1.5%) is down after Musk sold more stock to cover his tax bills
Weibo (-5.3%) was fined 3 million Yuan for regulatory transgresses
Terminix Global (+21%), NYSE: TMX, will be acquired by the British firm Rentokil for $6.7 billion in cash and stock
Alcoa (+4.2%) will be added to S&P Midcap 400 before Monday's open
Dell (-1.7%) was downgraded by Evercore to "in line" from "outperform"
Ralph Lauren (-3%) was double downgraded by Goldman to sell, noting fading brand momentum
Neogen (+12%) will merge with the food safety division of 3M (+1.28%); traders think that this is an accretive deal for both sides

This commentary is as of 9:11 am EDT.

🌊 BY THE WAY

🙋Answer. US consumers plan to spend $998 on gifts, holiday items and other non-gift purchases for themselves and their families this year, according to the NRF (National Retail Federation)
🔎 Google's year in search. So what's the top global search term so far this year? Hint: think cricket! (Google Trends)
🧐 A bite worth reading. What's a crypto wallet? (Finny Bite)
📇 Apple now lets you choose contacts who can access your account when you die. Here's how to set it up (CNBC)
Finny lesson of the day. As you think about taking profits or not, brush up on what it means to rebalance your portfolio & why you should do it regularly:

Rebalancing Your Portfolio

Investing Basics

9 mins

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The Gist is Finny's twice a week (Tues & Thurs) newsletter covering personal finance & investing insights and money trends. Finny does not offer investment and stock advice. The editorial team: Chihee Kim, Austin Payne. Ashu's Corporate Corner is brought to you by Ashu Singh.

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