December 2022 Newsletter

​Greetings Friends,
Hopefully you have recovered from turkey overload and are getting those voices all tuned up to go caroling (does anyone do that anymore?)  In the midst of the busy holiday season, we hope you are looking forward to spending time with family and friends and enjoying yourselves.  The holidays are the time for celebration and positivity, and we wish you all the best.  If you are travelling, please be careful.
As John so thoughtfully expressed last week, we are truly grateful for the opportunity to be of service to you.  This has been a challenging year for so many and we appreciate your confidence by allowing us to help you navigate through these times.
In the spirit of giving, your patronage of Reality Financial Planning Services enables us to help others in need of assistance, and to make its annual contributions to the Community Foundation’s “Season of Sharing”, All Faiths Food Bank, and Mayors’ Feed the Hungry charitable organizations. 

​The Crypto Conversation
One theme we have avoided in these letters, but likely comes up when folks gather to discuss the “stuff” of popular interest, is cryptocurrency.  As fiduciary advisors, we eschew the topic, as it is most often not in our clients’ best interests to include as an “investment” option.  Much like buying lottery tickets as a retirement plan or going to the casino to build savings, owning cryptocurrency can be “fools gold” for the those seeking long term wealth.
A few weeks ago, the conventional wisdom in the cryptocurrency “investment” world was that the safest place to start buying Bitcoins and other virtual currencies was something called the FTX exchange.  FTX was the safe-for-beginners destination for buying and selling ‘assets’ that were basically manufactured out of thin air.  In fact, one of them, called FTT, was a digital token that was manufactured by the computers at FTX itself.
That, of course, was before FTX filed for bankruptcy, before it was learned that the company was using customer funds to prop up a related company’s hedge fund trading operation without permission. (The hedge fund, Alameda Research, has also filed for bankruptcy.)  This house of cards may see more casualties before the final digital dime drops.
In the process, an estimated $30 billion of crypto ‘assets’ have vanished, and the FTT coins have dropped 90% of their value, apparently on their way to zero.  This confirms what many traditional investors have long believed: that the cryptocurrency market is made up of purely speculative assets.  But the larger question is whether this signals a rush to zero for Bitcoin, Ethereum, Dogecoin and a few hundred other virtual tokens that have been circulating in the darker shadows of the investor world.  And if billions of dollars are wiped out of investor balance sheets, what will be the impact on the more traditional investment markets?
So far, the FTX collapse has caused few ripples outside the crypto world, in part because the financial marketplace has never been an active participant in it.  Banks are not collateralizing loans in Bitcoin, very few mutual funds have allocated investor money in cryptocurrencies and most publicly traded businesses have declined to accept virtual tokens in return for their goods and services.  That means that any impact will come from suddenly cash-strapped (mostly younger) retail investors who might have to liquidate their stock holdings to make up for their speculative losses from the FTX collapse and a potentially wider drop in crypto values. 
With the benefit of hindsight, it might feel natural to express some measure of scorn for people who put money into virtual “investments” whose only tangible form was as bits of electricity somewhere in the cloud.  But a better response is to feel sympathetic toward the people who woke up to realize that they collectively lost $30 billion of their hard-earned money, and potentially stand to lose much more as this crisis plays itself out.
 
Market Update
In the spirit of positivity and keeping good cheer for the holidays, we are going to coast into the year end and hope Santa (Fed Chair Jay Powell) keeps the interest rate increase jingle to a minimum and The Grinch of inflations abates. 
We will save our pearls of wisdom and market prognostications for the new year.

​Final thoughts
If you are so inclined, check your local TV listings and watch It’s a Wonderful Life for the 100th time.
If you can, sniff some evergreen and pour a glass of eggnog for yourself.  Let's all go find some mistletoe and let the Most Wonderful Time of the Year begin for you and your family.  We have much to be thankful for and we hope you enjoy a fantastic holiday season. 
We wish you an excellent holiday season, good health, and much happiness, and just around the corner, a prosperous new year.  As always, please do not hesitate to reach out if you have questions or concerns.

​Sincerely,
Joe Downs, CFP® & John Cunningham, CFP®