'The Financial Ascent' is here to provide more value in fewer words. Bringing you the quick hits and why it matters in a manner you can understand.
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Need To Know:
Recession: Fact vs. Fiction
01. What is it?
There is no standard definition for a recession.
The most common rule of thumb defines it as two consecutive quarters of declining GDP.
The well-known National Bureau of Economic Research (NBER) - okay, I admit no one knows NBER despite them being the authority on economic research - has its definition.
“A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
At the most basic level, a recession is a significant economic decline over an extended period.
02. Why It Matters:
The media wants us to believe:
The reality is:
Unemployment just reported the lowest monthly rate since the 1960s at 3.4%
GDP was up for the second consecutive quarter in Q4 2022 - increasing by 2.9%
Consumer spending is strong and Real Disposable Income is growing
Even real estate has reasons to be cautiously optimistic
It all points to the fact we aren’t teetering on the edge of a recession like we are being sold.
03. The Big Picture:
I’m not here to predict if a recession will hit or not.
Based purely on the facts, we are not there - even with yesterday’s inflation news. But that doesn’t mean things can’t change.
The critical point is not to get caught up in the media hype train.
The media is a business that succeeds by getting views. Many sources do look to keep us informed, but at the end of the day, the main business is entertainment.
The over-analysis of every data point and constant ‘breaking news’ serve to grab and keep your attention.
Instead, it only adds yet another barrier to sound financial decision-making.
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In The Know
01.
Google launched Bard last week, its generative AI platform, in response to the uproar that Microsoft received for their acquisition of ChatGPT.
The Importance: Let’s start with the obvious. The name sucks - do better Google.
More importantly, the launch demo didn’t turn out to be the display of search dominance for Google’s CEO Sundar Pichai.
An incorrect answer produced by Bard in the demo led to concerns about the tool's validity resulting in a 9% skid in stock price (worth $100B in market cap).
02.
A year of down rounds is likely for startups and will push firms to have solid balance sheet management to extend runways.
The Importance: We saw big tech take Tyson-sized punches last year, with stock prices dropping as much as 80%.
The valuation drops have made their way into the private sector, as firms looking to raise capital are not seeing high-end valuation multiples from 2021.
Not only is this a reset to expectations for those with equity in these private firms, but it also puts pressure on executive teams to tighten the belt on their budgets to keep the lights on.
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Just No
01.
Yup, these are real internet 'experts'
The Real Deal: Real estate can grow wealth and generate passive income. It has unique tax benefits, provides inflation protection, and provides diversification with stocks and bonds.
But nothing gets me more fired up than these online gurus who talk about the upside of leverage (borrowing most of the purchase price) and forget to mention its MASSIVE downside.
Things are great when home prices keep climbing, and you're cashing those rent checks.
But is it really a ‘beautiful circle’ when the market drops 20%, you can’t find renters to fill vacancies, and you still have to write checks for maintenance on the property?
Don't worry - I'm sure the incredible $299 offer for one of these grifters’ online courses will give you all the secrets you need to make it simple and stress-free.
Before I Go...
If you use a CPA or tax preparer, reach out ASAP. They will only become busier, and the filing deadline will creep up on you.
If you haven’t created a plan for your vesting equity compensation yet - get it going. Staying ahead of vesting will help ensure you don’t have tax surprises/penalties down the line.
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