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Date: June 27, 2022
Author: Ivan Zhang
CEO and Co-Founder Ivan Zhang tackles the top market observations to start your week better informed.
The housing market is still hot with new buyers consistently bidding above the asking price, crypto stabilizes as the fallouts from recent events are becoming clear, and food insecurity could threaten our globalized world. Keep reading to learn more.
TLDR: Buyers are still bidding above the asking price despite a double whammy of higher prices and higher interest rates.
Despite the persistent drop-off in existing home sales, prices keep climbing. While many have been feeling the bite of higher interest rates on mortgages, those that can still afford to buy are still afraid of missing out. While it's hard to say exactly what is driving this dynamic, this could be an indication of concern over inflation. Real assets are typically good inflation hedges, and while it's likely that the post-COVID run-up in prices is already played out, prices might not drop as many expect if there is a persistent belief that the Fed might not be able to curtail inflation.
TLDR: Crypto prices stabilize as projects get bailed out and the picture of the recent crypto fallout becomes clearer.
Crypto prices bounce back from the lows of June 18th as the forced selling seems to have stopped and participants begin to untangle the web of companies impacted by the rout. Voyager is the latest to announce that they had over $700mm+ of loan exposure to 3AC, a hedge fund that allegedly collapsed due to leveraged positions on crypto. Meanwhile, BlockFi and Voyager are receiving aid and funding from companies associated with Sam Bankman-Fried, a crypto entrepreneur, reminiscent of a mini JP Morgan bailout of the banks over a century ago.
TLDR: Food inflation and insecurity could be tremendously destabilizing globally, especially for low-income countries. Rough waters ahead.
Low-income countries are now spending more money as a % of GDP on imports, mostly driven by food and fuel. This is not a good development because The Economist finds "that rises in food and fuel prices were a strong portent of political instability, even when controlling for demography and changes in GDP." This creates additional pressure on governments at a time when government debt has grown across the board even before the recent onset of inflation.