☕ Midweek News Update

Top Headlines 🗞️

House Speaker Kevin McCarthy Gets The Boot

For the first time ever, the Speaker of the House has been voted out. This comes just days after convincing members of Congress to sign a 45-day deal to keep the government from shutting down. McCarthy was appointed as the 55th Speaker back in January, his tenure lasting just nine months.

Speaker of the House is an important job, landing third in line for the presidency. I’m no expert on the U.S. government, so here’s a metaphor courtesy of ChatGPT: The Speaker of the House is the legislative DJ, curating the playlist of bills, orchestrating the flow of debates, and ensuring the political dance floor runs smoothly.

Not bad for a robot. Read more about what’s next here.

We’ve talked about how important the position is, but how does it trickle all the way down to you?

In its current state, the government is still figuring out next years budget. The Speaker leads the decision making process for taxation and government spending. If a far-right member is voted in, expect big budget cuts. If a far-left wins, which is unlikely, expect more government spending on social services, education, and environmental protection. Either way, it directly effects the economy and things such as healthcare and taxes. The Speaker’s decisions will undoubtedly make their way into American homes.

Commercial Crash?

$1.5 Trillion. That’s the amount of commercial real estate debt due before 2025. It’s safe to say that there is at least a crash looming. Office buildings make up roughly 25% of all commercial property, and it will be difficult if not impossible to refinance.

Let’s see how we got here and how things may shake out.

• A big issue, especially surrounding office real estate, stems from Covid. The push for remote work allows companies to save money on rental costs and other office expenses. Even though 90% of companies say they'll be back in the office by the end of 2024, good luck getting people to go back to their morning commute.

• Online shopping has taken over and retail stores can save big by listing products online rather than in store, and consumers have adjusted to shopping online. These factors go hand in hand, adding to the crumbling commercial real estate market.

• Higher interest rates have made borrowing money to pay loans on real estate even more expensive. Now, owners face the problem of continuing to shell out money for a building that isn’t making them money, or sell for a huge loss. On top of that, buyers aren’t convinced the market has hit its low point yet, making them hesitant to pull the trigger. Yikes.

Why does it matter to you? Let me give you three reasons:

1. When the commercial real estate market is up, businesses are often hiring more employees. More employees means more people have money, attracting consumers to spend said money, altogether boosting the economy. Conversely, when the market is down, people could lose their jobs due to downsizing or businesses closing up shop. And we know what that means. 👎

2. If you’re in the market to rent a home or an apartment, it’s possible you may see higher and higher rental prices as businesses look to compensate for lost money. When the market is good, developers tend to build more properties, stabilizing rent.

3. What does a healthy commercial real estate market look like? Shops, restaurants, and places of entertainment are alive and well. Since people are out and spending their money, we can assume it’s a strong economy. Take note of the crowds you see over the next few weeks when you’re out and about, it can tell you a lot about consumer confidence.

Quick Hits 🥊

The 3 ½ Day Work Week

Jamie Dimon, the long-time CEO of JP Morgan, gave us a little something to look forward to. We’ve all seen AI take the world by storm, and Jamie predicts that AI will be able to boost productivity so much that a 3 ½ day work week will become a reality. However, some jobs will become obsolete and replaced entirely by AI.

Social Media Censorship

The EU Media Freedom Act is set to be adopted, dramatically altering the way social media companies censor information. This new act will allow people to self-declare as media outlets and post content without censorship for 24 hours. This new law could spill over into other parts of the world, and it will be interesting to see if misinformation increases or decreases as a result. Learn more here.

FTX Trial Begins

The Trial of Sam Bankman-Fried and the FTX meltdown got underway yesterday. Crypto has had a rough two years, and the industry continues to be plagued by bad actors, hindering widespread adoption. Oh, and a lot of well known people are caught up in the trial.

Employment Update

New economic data came in and it was a bit surprising. US job openings increased, layoffs were little changed, and people are quitting their jobs more. This good economic news means that Wall Street now thinks the Fed will need to continue hiking interest rates. That’s because this good news signals that inflation may not be under control. So with that, stocks plummeted and bond rates increased.

Quote of the Day 💭

“I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.” - Jeff Bezos