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Wildfires and insurance policies

May 31, 2023

In the 1970s, as Margaret Thatcher took office as the UK Prime Minister; the country had a staggering inflation of 25%. Over the next 20 years, she raised interest rates, cut spending, privatized state industries, and made welfare reforms. The inflation rate crashed to less than 5% by the time she left office in 1990. This was followed by a brief recession, after which the country experienced stable growth until the year 2007.

Alright so today we’ve got:

  • The Debt Deal. Will it? Won’t it?

  • Coinbase ex-manager settles with SEC.

  • State Farm is pausing new insurance sales in parts of California.

    Let’s do a scan.

The Big Picture

President Biden and Republican House Speaker Kevin McCarthy sat down this weekend to draw up a debt ceiling deal. In summary, it would reduce the total deficit by $1.5 trillion over a decade.

Source: WSJ.com | Congressional Budget Office

Non-military spending would not increase for the fiscal year 2024. Military spending would increase by about 3% in fiscal 2024. There would be some spending cuts on the IRS, and stricter regulations on SNAP( Supplemental Nutrition Assistance Program). Student loan repayments which have been on hold since 2020, are expected to start in August.

Talking about the debt limit deal, economists at JP Morgan said that there would be a 0.2% reduction in federal spending as opposed to the current trend. This would not be a ‘game-changer’. However, consumer spending and job growth data in April have shown positive signs for the current state of the economy.

As of now, the deal has not officially passed as some GOP members believe the spending cuts aren’t sufficient. The due date for defaulting is expected to be at June 5 according to Janet Yellen.

Sector Sweep

Tech

  • A former manager at crypto exchange Coinbase settled with the SEC over cryptocurrency enforcement. This settles the SEC lawsuit over Coinbase for insider trading claims.

  • San Jose based Nutanix, a cloud company stated that a third-party software intended for evaluation has led to $11 million in payouts to vendors.

  • 350 executives, including employees of Open AI and Google, signed a statement saying the global scale of extinction due to AI is at par with pandemics and nuclear war.

  • CEO of Intel said the company has been struggling due to leadership issues, and work culture which has led to Nvidia, AMD overtaking it in the chip industry.

Automotive

  • Hyundai and Kia rolled out software fixes in the wake of car thefts in multiple states. Car thefts have still continued despite the change for the South Korean automakers.

Real Estate

  • New York’s real estate developers are doing a fire sale on some of their office buildings. RXR defaulted on the $240 million loan over their office tower in Manhattan.

Insurance

  • State Farm paused sales of home insurance policies in California owing to wildfire risk and increased inflation in construction costs.

Finance bro term of the day: Retained earnings.

Retained earnings is a part of the company’s balance sheet. This is a part of a company’s net income which is held by the company instead of being given as dividend payouts or payments on debt. If a company goes through a loss, the retained earnings number goes down.

That’s all for today folks. Do keep a lookout for our weekly email about stock deep dives and personal finance strategies this Saturday.

BTW, do tell us how we did. Just hit us with a reply.

Cheers!

Memetic Universe

Math is hard sometimes.