Powell's Predictions and Pricey ProblemsMarket Sizzle: Credit Jumps, Massive Verdicts, Fraud's Fallout, Prediction Markets Surge
Good afternoon! Did you catch Jerome Powell on Capitol Hill today? The Fed chairman's got his calendar packed, chatting with the Senate Banking Committee and dropping some economic wisdom. He hinted that good news might be on the horizon for inflation but warned about the risks of cutting rates too soon. Sounds like he’s got quite the balancing act to manage—maybe he should try juggling next!
Credit Card Debt Soars Again
US consumer borrowing jumped in May, mainly due to higher credit card balances. Total credit went up by $11.4 billion, more than in April. Revolving credit, like credit cards, increased by $7 billion. Non-revolving credit, like car and school loans, rose by $4.3 billion. People are using credit cards more because they've spent their savings from the pandemic. This, along with higher living costs, is hurting household budgets and slowing spending. Retail sales barely rose in May. Credit card borrowing rates hit 22.76% in May, close to a record. Loans for new cars from banks stood at 8.2%. Delinquent debt was 3.2% in March, a bit lower than late 2019 but rising for all debt types. Massive Verdicts Rock Corporations
Juries are giving out huge verdicts more often, causing issues for US companies. A "nuclear" verdict is when a jury awards over $10 million. These verdicts increased by 27% in 2023. The US Chamber of Commerce said verdicts over $100 million reached a record high last year. Big insurance companies, like Chubb, are worried about these rising verdicts. This trend is making insurance more expensive and harder to get. For example, Exxon Mobil was ordered to pay $725 million to a worker who got sick from benzene. Also, a billionaire was fined $900 million for a sexual-battery case. People are angry at big companies and use jury verdicts to punish them. This trend is making life harder for companies and affecting the cost of goods and services. Insurance experts say it's class warfare: the 99% against the 1%. Property Fraud Rampages Market
Prosecutors are cracking down on property mortgage fraud. This crackdown worries the $4.7 trillion industry. Fraud cases grew between the mid-2010s and 2021 when property prices soared. Now, falling property values are exposing these scams. Many frauds happen because lenders don't double-check building values. Lenders trust numbers that seem in line with other properties. But auditing is costly and time-consuming. Since last fall, several landlords in cities like Cincinnati and Hartford pleaded guilty to fraud. They inflated property values to get bigger loans. Now, Fannie Mae and Freddie Mac are blacklisting brokers involved in shady deals. Prosecutors are working hard to find these frauds. Some experts say fraud happens in boom times and gets exposed during busts. This trend is making life tough for commercial real estate and lenders. Betting Boom Sparks Market Frenzy
US traders are getting excited about prediction wagers. Interactive Brokers is launching a new platform, ForecastEx, where users can bet on future events. This includes economic data releases like jobless claims and consumer sentiment. Event contracts work like yes-or-no bets. If you guess right, you win $1 per contract. If wrong, you get nothing. Prices change based on the odds before the event happens. Big players like Susquehanna International Group are joining in. They recently started trading on Kalshi, a platform for event speculation. Since their involvement, Kalshi's trading volume has surged. Financial firms are taking notice. They see these markets as useful for predicting trends and managing risks. However, regulators are wary and considering new rules. The Commodity Futures Trading Commission (CFTC) wants to ban certain types of event bets. Despite this, prediction markets are growing fast. Experts believe they offer valuable insights into public opinion. Quick Sizzles:
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Selasa, 09 Juli 2024
Powell's Predictions and Pricey Problems
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