October 25, 2022

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TOGETHER WITH

Good Tuesday. Of all the plastic waste generated by US households in 2021 (51 million tons) can you guess what percent of it was actually recycled? a. 5%, b. 25%, c. 55%. Follow the wave 🌊 below for the answer.

Today's money topics are:

The weird housing market
Have you checked your credit report lately?
The outlier

HOUSING

The Weird Housing Market

A unique set of circumstances has brought all housing market participants a weird, never before seen scenario. We find ourselves dealing with a confluence of factors that are leaving the whole market with a sense of disarray.

Give and take

On the buyer's side, things are rough. Interest rates have risen about 120% since January, tacking on 6 figures of interest to many home purchases. Combine this with home prices having soared over 40% over the last two years and an already restricted inventory, and affordability is looking bleaker than ever.
On the seller's side, things aren't all sunshine either. Because of the same reasons cited above, more potential sellers are reluctant to sell simply because of how much it would cost to replace their current home. Home sales have slowed drastically, and fewer prospective buyers are able to get approved for mortgages given higher borrowing costs.

Existing home sales are falling faster than during the global financial crisis

The big picture

This is a weird predicament, and it's unlike 2008 in a few ways. Yes, rates are rising rapidly, but lending standards are far more stringent, and we have far fewer homeowners relying on adjustable-rate loans as most have locked in lower fixed rates.

These factors, combined with things like an extremely low supply are dampening a free fall in home prices, and why most predictions are calling for only a small slump or even a slight rise in 2023.

MONEY TIP

Have You Checked Your Credit Report Lately?

It's easy to take the passive route on your credit report, especially if you haven't been racking up debt, but that can still be a mistake. Keeping a watchful eye on your credit report is a vital part of a healthy financial routine, even if you're someone with an 800+.

With the 3 major credit bureaus extending the availability of a free weekly report through 2023, now is a better time than ever to start.

3 things to do with your credit

Check it consistently: Checking your report at least once a year is a necessity. You just might be surprised by what's on there. Not only is it important to confirm everything looks right, but this is also preventive maintenance that can help you spot errors and even identity theft.
Seek ways to improve: If you're like many of us without a perfect credit score, checking your credit report can induce the mindfulness needed to spark consistent improvement. Look for pain points in your report that could be dragging down your score like high utilization (your balance as a percent of your available credit), late payments, and more.
Check multiple sources: Your credit report won't show your actual score, but rather it's what curates the end score. This is why it's important to check your report and score from multiple sources, and even multiple scoring models like FICO, VantageScore, and more to see your profile from all angles.

Take this related lesson on this topic and earn Dibs 🟡 while you're at it:

Credit Report Basics

Credit Scores

8 mins

TOGETHER WITH FINMASTERS

Stock Wars: Compare Investments in Stocks & Funds

Have you ever wondered how much a $100 investment in Intel 20 years ago would net you out today? And how much more you would've had today had you picked the Apple stock instead?

That's where FinMasters' Stock Wars tool comes in really handy. Here you'll find out that a $100 investment in Apple 20 years ago would net you out roughly $75K more today than the same investment in Intel.

You can use the Stock Wars tool to compare stock or fund performances over time and start thinking about your next bet.

Check out Stock Wars by FinMasters. It's fun, educational, and totally free.

INVESTING

The Outliers

Much of what we do in the world of investing is guided by conventional wisdom, which is often a distilled-down version of what the data tells the experts. From things like the 60/40 portfolio yielding a 7% annualized return to tens of other portfolio variations out there, everything is ultimately driven by statistical probabilities.

Most of the data we use is heavily reliant on assumptions — namely, that the most likely scenarios are the most important to get right. But what about those fringe situations or anomalies?

Enter the 5% club

The bell curve: Outcomes in reality almost always mimic the shape of a bell curve, with the majority (95%) of events occurring within 2 standard deviations of the center, with the extreme outliers hanging on the fringes. While we might not use the bell curve to directly craft a portfolio, those assumptions about the most common outcomes occurring can be found in the way we invest.
Assuming the best: When we utilize those popular retirement calculations that suggest $X dollars invested for Y years will likely yield a net balance of $Z amount, we're assuming they mean well. And since these calculations are almost always based on historical data, it's never an exact science.
Accounting for the 5%: What if a massive downturn occurs right before retirement? What if we don't make an expected 7% annual return on a 60/40 portfolio over a decade of investing? Basically, what if a 5% outcome happens? While there's no single solution to avoid all risks, it's good to be aware that fringe events will happen. And to better account for such tail-end events, one way to think about your investing strategy is to invest with an objective towards meeting your goals (goals-based investing) versus some target market return.

🔥 TODAY'S MOVERS & SHAKERS

Medpace Holdings (+35.6%) as the company that manages clinical trials for drug companies researching new products well-surpassed Wall Street's revenue and earnings for the quarter; 2023 guidance was also much stronger.
Calix (+16.8%) as the company that provides cloud, software platforms, systems, and services to communications service providers reported stronger than expected earnings today;
JetBlue (-5.3%) after reporting lower bottom-line results; JetBlue's CFO, Ursula Hurley, wrote in a note to employees that it won't post a full-year profit in 2022 "after the bumps we faced in the first half of the year with the Omicron variant and operational challenges."
S&P 500 Index (+1.2%) to $3,843.78 (1D)
Bitcoin (+1.7%) to $19,658.10 (1D)
Ethereum (+4.1%) to $1,399.50 (1D)

This commentary is as of 8:30 am PDT.

🌊 BY THE WAY

♻️ Answer: 5%. Titled "Circular Claims Fall Flat Again," the study found that of 51 million tons of plastic waste generated by US households in 2021, only 2.4 million tons were recycled, or around 5%. After peaking in 2014 at 10 percent, the trend has been decreasing, especially since China stopped accepting the West's plastic waste in 2018 (CBS)
🤔 Why investors aren't going green (CNN)
🧊 ICYMI. Should you freeze your credit? (Finny)
⚛ NanoVMs has a new operating system that runs cloud workloads faster and safer. The Silicon Valley deep-tech company has 4 patents issued, 3 more filed and 3 grants awarded from the NSF, US Air force, and Dept. of Energy. Learn more & invest in NanoVMs*.
💟 Finny lesson of the day. Benefits open enrollment happens at different times throughout the year depending on your company. Many companies do go through this exercise in the fall though, so every edition of The Gist this month will highlight a lesson related to helping you decode a work benefit:

Selecting Health Insurance

Insurance

6 mins

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Finny is a financial wellness platform on a mission to make your money work for you. The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance & investing insights and money trends. The content team: Austin Payne, Carla Olson, Chihee Kim. Finny does not offer investment and stock advice.

We're thankful for the support of today's brand sponsor⁠—FinMasters—as they make rewards on our platform possible. If you're interested in sponsoring The Gist, please reach out to us. And if you have any feedback for us, please contact us.