What a year 2023 was! Cryptocurrency scandals (again). A vicious, murderous attack on one of America’s allies, Israel, triggered yet another overseas war. The wealthiest person in the world told his customers to, um, well, you know. America girded itself for a contentious election between a former president who had criminal indictments filed against him and a current president who is being threatened regarding how to keep the U.S. government from shutting down. Some of the largest U.S. banks failed. The U.S. shot down a Chinese spy balloon. And so much more chaos throughout the year. Chaos leads to confusion, so it is no surprise that investors took to the internet to seek clarity. According to the data collected by Investopedia, these were the top 10 most-searched economic and investment terms for 2023.
American Dream
The Investopedia team reminds us that the term “American Dream” was first referenced by author James Truslow Adams in his book “Epic of America.” Adams describes it as “that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.” In other words, it is the achievement of a U.S. citizen of popular milestones like buying a car, then a home, getting married, having children, then putting them through college, and retiring with a nest egg that allows them the peace of mind that they won’t run out of money in retirement. Many feel that the American Dream is no longer achievable due to inflation putting it out of their reach.
Bank Failures
On Friday, March 10, 2023, Silicon Valley Bank suffered a bank run that forced the Federal Deposit Insurance Corporation (FDIC) to shutter it. Depositors were apparently on tenterhooks. On Sunday, March 12, 2023, regulators closed New York-based Signature Bank due to its run on deposits. Together, these were the second and third largest bank closures in history (following the 2008 closure of Washington Mutual). Then, on May 1, 2023, First Republic Bank said, “Hold my beer,” and became the second-largest bank failure in U.S. history. These bank failures could have been the bowling balls that knocked over other banking pins to spark a string of failed banks. However, the Federal Reserve learned from the 2008 Great Financial Crisis and provided deposit guarantees that stymied further bank runs.
Treasury Bill
This year, the Federal Reserve put trillions of dollars of Treasury Bills into the market for investors to swoop up. The Fed did this to unwind its balance sheet to tighten monetary policy, slow the economy, and reduce inflationary pressures. With the possibility of more bank failures and an ensuing crisis, Treasury Bills became a more interesting store of value due to their safety.
Certificate of Deposit
If Investopedia made a list, “Certificate of Deposit” or CD would have been on its “Top Stupidest Investment Ideas for 2023.” Bank depositors searched for higher yields and switched from their savings accounts to illiquid CDs. But every CD I saw paid less than money market mutual funds and less than their similar-term Treasury bond competition.
Artificial Intelligence
Forget about investing. Small businesses like my own, Berkshire Money Management, nearly broke the internet searching for the best ways to utilize artificial intelligence, or AI, to help clients in the most expeditious manner. If used intelligently, AI will help companies around the globe deliver more for less. And to do so, it takes AI training. AI training can be complicated, but it’s a lot easier than finding and hiring new employees. It is no wonder that AI was the hottest investment theme of 2023. Corporate executives took note of investor expectations. Public companies made sure to reference AI in quarterly earnings reports, even if they were not involved with the technology.
Inverted Yield Curve
In 2019, the inverted yield curve was one of the reasons I argued that there would be a recession in 2020 (that and the Duke Fuqua CFO Survey). No, the inverted yield curve didn’t predict COVID-19. I argue that there would have been a recession regardless of the pandemic. After the pandemic, the curve between the two-year and 10-year Treasury notes inverted again on July 5, 2022, and remains inverted. An inverted yield curve is one of Wall Street’s most closely watched recession indicators because it works. The inversion of the two-year and 10-year Treasuries has been a reliable predictor of recessions. Since 1976, there have been 10 such inversions that preceded four slowdowns and six recessions.
BRICS
There were some silly concerns about a threat to the U.S. dollar’s dominance as the world’s reserve currency. This conversation occurs every few years, and then the question asked, but never intelligently answered, is, “Which country would issue the world’s reserve currency?” The answer often changes, even though the result is the same: The U.S. dollar stays on top. This time, dippy pundits suggested that the so-called BRICS countries (an acronym for the collective of Brazil, Russia, China, and South Africa) would step up. They didn’t.
Assumable Mortgage
The average 30-year fixed mortgage topped eight percent in 2023. Intuitively, a reasonable person would expect that the effect on affordability would be to drive down home prices. Instead, home prices rose because fewer houses were listed for sale. Many potential house sellers didn’t want to give up their five, four, or even three percent mortgage rates to trade into a sky-high eight percent rate. That forced some buyers and sellers to find a workaround that, if they qualified, would transfer the existing mortgage from the buyer to the seller. The seller could then assume a much lower mortgage rate than what was being offered by banks.
Racketeering
On a non-investment basis, the term picked up momentum when a Georgia court brought racketing charges against former president Donald Trump. The latest hot company, especially during the gift-giving season, is SHEIN. In July 2023, this fast-growing Chinese retailer had a Racketeer Influenced and Corrupt Organizations Act (AKA, RICO) claim filed against it.
Debt Ceiling
The debt ceiling (AKA, the “debt limit”) is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past. Yet again, Congress could not come to terms on how to fund the government until the last minute. They did it by kicking the can down the road. But the agreement cost the speaker of the House his job, which means we will have to endure a similar circus next year.
Allen Harris is the owner of Berkshire Money Management in Dalton, Mass., managing more than $700 million of investments. Unless specifically identified as original research or data gathering, some or all of the data cited is attributable to third-party sources. Unless stated otherwise, any mention of specific securities or investments is for illustrative purposes only. Advisor’s clients may or may not hold the securities discussed in their portfolios. Advisor makes no representations that any of the securities discussed have been or will be profitable. Full disclosures here. Direct inquiries to Allen at AHarris@BerkshireMM.com.
