POP QUIZ

Who was the world’s wealthiest person during the Great Depression? (Read below to find the answer!)

IN THE NEWS

🎯 Earnings Round-Up

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Goldman Sachs: We covered the first big story out of Goldman today with DJ D-Sol putting the headphones away. On a more serious note, the iconic Wall Street firm’s stock slid around 2.40% at one point after reporting third-quarter earnings.

• Compared to the same period last year, revenue was down 1% while profits fell 33%. A big $864 million writedown of the company’s GreenSky fintech business and real estate investments hurt its bottom line.
• It’s also lost some $3 billion over the last three years on its foray into consumer banking (when banks lend out your deposited money), venturing away from its bread-and-butter investment banking business (where banks collect fees for helping companies list on stock exchanges, raise money through issuing debt, etc.).

Lockheed Martin: The defense-contracting giant beat estimates on revenue and earnings, yet its profit margins were “disappointing,” according to one analyst.

• After initially popping higher, the stock sank almost 1% lower on the day before rallying back. Although defense spending is rising worldwide in light of Russia’s war in Ukraine and the Israel-Palestine crisis, Lockheed’s stock is down over 12% in the past six months.

Johnson & Johnson: Despite also beating earnings and revenue projections, investors didn’t like the pharmaceutical company’s stock — it fell 0.85%.

• Revenue growth elsewhere was offset by declining sales for its prostate cancer drug Zytiga and blood cancer drug Imbruvica, in addition to its Covid vaccine.

Lucid Group: Although the EV-maker is delivering more vehicles (up 4% year-over-year), production declined 32%. That raised enough worry to push down its stock 5.3% on Tuesday.

• Saudi Arabia’s government is one of the company’s biggest investors, and it agreed last year to buy some 50,000 EVs over the next decade from the company, with an option to buy 50,000 more.

Bank of America: Unlike the other big names reporting earnings, Bank of America’s stock actually had a good day, up about 2.3%. The U.S.’s second-biggest bank beat revenue and earnings estimates — profits were up 10%, thanks to a boost in interest income from higher rates on loans.

• The bank also didn’t lose as much on bad loans as anticipated. Still, analysts called it just an “okay quarter.” It’s also the worst performer of its big bank peers this year, with its share price down nearly 18%.

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💵 The Dollar Acts Like a Commodity Currency

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Nothing is stagnant in financial markets. That’s why, among other reasons, the phrase “past performance isn’t a guarantee of future returns” is so common in investing. Relationships are constantly changing between asset classes, whether you realize it or not.

Rebecca Patterson, the former chief investment strategist at the legendary hedge fund Bridgewater Associates, sees a big change in one area: The relationship between “oil prices and the dollar.”

• And that shift is rippling through global economies and markets as the dollar’s exchange rate becomes more correlated with oil benchmarks rather than having an inverse relationship.

What changed? Well, America’s relationship with oil generally has changed — in the last two decades, it’s gone from being one of the world’s largest importers of oil & gas to one of the largest exporters.

• In 2019, America became a net exporter of energy overall.
• As a result, the dollar is increasingly a “commodity currency,” where rising oil prices boost U.S. trade exports and, therefore,

  support the dollar’s value.

Why it matters:

Amid oil’s recent rally, the dollar has also climbed higher. The DXY index, pitting the dollar’s exchange value versus other major currencies, jumped 6% between mid-July and mid-October. But the dollar and oil prices haven’t always traded higher (or lower) in tandem:

Three strikes: This has created a “trifecta” of higher energy prices, higher U.S. interest rates, and a strong dollar, which are weighing on the global economy.

For example, in South Korea, a major oil importer, not only have oil prices risen, but the dollar’s rise adds to that pain (since oil is typically sold in dollars).

• In other words, the cost to purchase oil in the country is strained both by oil prices rising generally and the South Korean won’s depreciation versus the dollar, making it more expensive to convert to USD and buy oil.
• Correspondingly, commodity prices have lifted inflation to its highest level in five months in South Korea, while the country’s central bank is trying to prevent the won from losing any more value against the dollar — it has depleted $4 billion worth of its foreign currency reserves just to purchase the won in currency markets and support its value.

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📝 The U.S. Gets a C+ In Retirement — Again!

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Got any ideas to help America’s retirement standing? Let us know by replying to this email, because the U.S. has once again scored a “C+” on its retirement report card as social security and 401(k) plans leave many Americans less financially secure than retirees in other developed nations.

• According to the Mercer CFA Institute Global Pension Index, the U.S. has fallen further behind the Netherlands, Australia, Sweden, Denmark, and Canada.
• The U.S. came in 22nd out of 47 countries, right in the middle of the pack.

Major shortcomings: Most retirees rely on social security and savings in retirement accounts. But that’s an issue when it comes to long-term solvency.

• “In the U.S., there’s good coverage of white-collar workers through employer systems. But what about the gig workers? What about the blue-collar workers?” noted the report’s lead author.

How the index works: The index weighs government and private-sector retirement income sources. It also factors in homeownership, household debt, and other costs. It doesn’t focus on the best places to live in retirement — many Americans would say Florida — but rather the best retirement systems.

While millions of Americans save part of every paycheck via a company-sponsored 401(k), many companies don’t offer them. And many Americans without access to a 401(k) choose not to put any money away on their own.

From The Wall Street Journal

Why it matters:

The issue is under sharper focus as Americans of all ages, including retirees, grapple with inflation that has fallen but won’t seem to go away.

• More American retirees are worried about covering their costs, and more are relying on family for financial support.
• When living on a fixed income while the price of virtually everything rises, you feel the effects of reduced spending power.

Case study: All workers in the Netherlands have both a private and public pension account. Naturally, it’s ranked at the top of the list.

On the flip side? Argentina, which ranked dead last out of 47 countries. It has a limited public pension system and voluntary, limited employer-based plans.

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TRIVIA ANSWER

The world’s wealthiest person during the Great Depression was John D. Rockefeller, who founded the Standard Oil Company, which dominated the oil industry. In 1913, his $1.4 billion net worth was equal to about 1.5% of America’s GDP.