The crisis in the Middle East continues with no real end in sight. The heat is rising on President Trump in Georgia, the crypto industry is hit with another large civil suit, the House cannot pick a leader, the UAW continues its strike and "Mattress Mack" is five Astros wins away from $43 million. This is the week in news.
Stocks were down slightly for the week while the US Ten Year yield is nearing its
We have written in prior weeks about the negative effect of higher interest rates on multiple industries. While spending remains robust, it certainly cannot continue at this pace. Credit card debt has reached record levels again. In January of 2021, there was $4.2 trillion in consumer debt at an average rate of 14.75%. This has increased to $5 trillion in August of 2023 at an average rate of 21.1%. Consumers have gone from paying $592 billion in interest per annum to $1.1 trillion. Secondly, the government annual deficit has effectively doubled. Once accounting tricks are removed from the numbers, in 2023 the US will spend $2 trillion more than it brings in. It was $1 trillion in 2022. At some point you have to pay the piper.
The Speaker saga in the House of Representatives continued this week with Rep. Jim Jordan losing three floor votes and a closed door private vote on Friday. Republicans have indicated they will propose a new set of candidates on Monday. The lack of a House Speaker is at a difficult time given President Biden is asking for $100 billion in aid for Ukraine, Israel in addition to fortifying the border between the US and Mexico.
Congress also needs to agree on how to fund the government as the most recent deal expires on November 17. This does not bode well for a fall 2023 enactment of the Opportunity Zones Transparency, Extension, and Improvement Act. While this is not a controversial bill, bigger issues need to be solved before this will gain any momentum.
Belpointe OZ (NYSE: "OZ"), the first publicly traded Opportunity Zone Fund, issued a press release this week to address the volatility in the companies shares. OZ has had a bit of a bumpy ride recently with its shares trading well below the NAV of their portfolio. OZ is similar to other funds who's underlying assets are worth more than their traded price. For example, the Grayscale Bitcoin Trust currently trades at ~12% discount to the value of their coins. OZ's discount is much larger as their NAV is based on valuations of their properties as OZ is exclusively focused on real estate.
Global Mineral War
Another month, another mineral exportation ban by China. China announced on Friday that it would restrict exports of Graphite, a key component in electric vehicles. Graphite, along with Gallium and Germanium which are also restricted, has no domestic production and the US was mainly reliant on China as they produce 80% of the world's graphite supply. China has been very tactical with their export bans as they have focused on minerals where they are the dominant global supplier and the US has little to no current production.
Jim "Mattress Mack" McIngvale is a legend in his hometown of Houston although his hedging strategies are not for the faint of heart. His furniture store runs a promotion that will rebate all mattress purchases over $3k if the Astros win the World Series. He hedges this risk by making bets on the Astros although he certainly is not using any Wall Street proven liability matching systems. Last year the Astros won the World Series and his bets in total paid $75 million. He is back at it again this year with bets that will pay him another $43 million if the Astros win in 2023. His bet was not looking good a week ago although the Astros have won three straight and one win away from the World Series.