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FINANCE
Interest Rate Surge Threatens Stocks

Interest rates have spiked dramatically over the past few weeks, creating a stark contrast to the stock market rally fueled by Donald Trump’s re-election victory. Following Trump’s win, the S&P 500 surged over 4% to a record high, buoyed by optimism surrounding his pro-business agenda, including tax cuts and deregulation. However, a sudden jump in interest rates has sent a sobering signal to investors.

The yield on the 10-year Treasury bond, a key benchmark for equity valuations, climbed from 3.74% in early October to 4.47% by mid-November—a 73 basis-point increase in just six weeks. This rise was driven by two factors: a higher “inflation premium,” reflecting concerns over prolonged Federal Reserve tightening, and a sharp increase in “real yields,” which grew from 1.56% to 2.15%. Real yields act as a discount rate for future earnings, reducing the present value of equities and challenging their lofty valuations.

Despite these pressures, stocks remain expensive, with the S&P 500’s price-to-earnings ratio at 29.4, its highest since the 2002 tech bubble. Investors are now questioning whether the rise in rates marks a temporary shift or a structural change driven by concerns over massive budget deficits and inflation risks. As Warren Buffett warns, fundamentals inevitably outweigh market optimism.
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REAL ESTATE
Generational Divide Fuels Housing Crisis

Meredith Whitney, known as the "Oracle of Wall Street," argues that U.S. home prices need to fall by 20% to address a growing "generational schism" in the housing market. Baby boomers own the majority of homes, while millennials and Gen Z face affordability challenges. Many boomers are "aging in place," unwilling to sell due to low mortgage rates or outright homeownership, creating a standoff between buyers and sellers.

Whitney predicts that a 20% price drop would reset the market to pre-pandemic levels without causing a crash, preserving homeowner equity. However, tight inventory and high mortgage rates keep prices elevated, with sales slowing in middle and lower tiers of the market. Luxury sales, meanwhile, are supported by cash offers.

Additionally, Whitney foresees a "silver tsunami" as aging boomers downsize, increasing supply and easing prices over the next decade. While some dismiss this scenario, she believes falling prices are necessary to make housing more accessible for younger generations.
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CRYPTO
Trump Media Eyes Bakkt Acquisition

President-elect Donald Trump’s media company, Trump Media and Technology Group (TMTG), is reportedly nearing an all-stock deal to acquire crypto trading platform Bakkt, according to the Financial Times. This would mark TMTG’s first expansion beyond its social media platform, Truth Social.

The news sent Bakkt shares surging 163% and TMTG stock up 16%, with further after-hours movement. Bakkt, founded in 2018 by Intercontinental Exchange (ICE), the owner of the New York Stock Exchange, has struggled financially. It issued a “going concern” warning earlier this year and faced delisting risks. Meanwhile, TMTG, despite being valued at $7 billion, has yet to turn a profit.

Bakkt aimed to integrate cryptocurrencies into retirement accounts, backed by major investments from Microsoft, Starbucks, and top financial firms. However, competition from established crypto players diminished its market position, leading to discussions of a sale.

This deal aligns with Trump’s growing interest in crypto. His family-backed decentralized finance venture, World Liberty Financial, recently launched, furthering his involvement in the industry. The acquisition could boost TMTG’s portfolio and increase Trump’s personal net worth, as his 53% stake in TMTG is currently valued at $3.7 billion.
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.