Roundup #57 🥱🌈
Should you be worried about banks crashing, is the 2024 Chevy Blazer EV a good buy, and cashing out stocks to pay off debt.
Welcome to The Boring Gay newsletter where I answer questions from my IG community about the gay experience, career, money, and cars.
Question 1
Can you explain that bank crash thing?
Lex: I can definitely try. Silicon Valley Bank “SVB” (which primarily serves tech companies and startup companies based out of California) crashed somewhat rapidly last week after revealing that they were trying to raise funds in the stock market to cover losses on bonds they invested in. This happened because as the Fed raises interest rates to keep inflation under control, bonds that people bought years ago at low-interest rates are actually bad investments. SVB happened to have a lot of its money in bonds instead of diversifying customer deposits like most other major banks. At the same time, the tech companies and startups that SVB serves are having trouble raising money in the massive ways they were able to in the last couple of years due to the shifts in the economy. SVB has been used to a steady stream of fat deposits from tech customers raising money from investors. But now, instead of letting all of their money sit at SVB, these tech companies and startups are making more withdrawals to pay their business costs. So last week when SVB revealed to the market that they lost a bunch of money on bonds and needed to raise more, major players in the industry sounded a warning bell and told companies with money at SVB to withdraw or transfer their funds ASAP.
When everyone goes to the bank at the same time to take out their money, the bank does not have it and it’s called a run on the bank. Banks are only required to keep a certain % of the money on hand for withdrawals - the rest they invest (that’s how banks make profits). So that’s what happened - everyone wanted their money, the government stepped in to stop the mania, and everyone with $250K or less in their accounts are FDIC insured so they will 100% get their money back. As you can imagine, these tech companies had millions in their accounts that are uninsured, but as of right now, the government says they will find a way to cover that too (likely by finding another bank to buy SVB). The government gets involved because this type of thing can cause economic panic. SVB is considered a regional bank and this scenario is extremely unlikely to happen to the major consumer banks most of us work with (even if it did, the government would step in to bail them out because if Bank of America fails, millions of consumers are screwed and our whole system collapses).
We will likely hear about more businesses failing this year and that’s kind of what the Fed wants to happen by raising interest rates. That’s why it’s abundantly clear we are heading into a recession - weaker businesses are going to start to fail, more layoffs will happen, and demand for goods and services will decrease as people are worse off financially. This is pretty much the only way inflation will come down. We have to slow down the economy. It sucks, but if we don’t do this, the price of everything will continue to go up at unsustainable levels and no one will be able to afford anything.
Question 2
What do you think about the Chevy Blazer EV?
Lex: The 2024 Chevy Blazer EV will be a strong competitor to Ford’s Mustang Mach-E. The Blazer is a mid-sized crossover that (in it’s most potent form) will have an insane 557 horsepower and 0-60 time of under 4 seconds. The electric range on the Blazer is expected to start at 247 miles and top out at 320 miles. The price on the lower-range model is expected to be about $45K. I think the design is pretty stunning and it should be a great car. I really haven’t spent too much time in Chevy’s to talk about the quality of materials, but I’d assume it’s on par with what you’d find in a Mustang Mach-E. I personally prefer the looks of the Blazer, although to be fair, the Mach-E has been out for a while. As time goes on, I think we’ll start to see the prices of EVs come down, so for $45K I’d like to see ranges of 300+, because the 200’s still seems kind of low to me for quite an expensive car - especially considering you can get a base Chevy Bolt EUV with the same exact range for closer to $30K. That said, these cars should qualify for a federal tax credit so that would be one incentive that sweetens the pot.
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Question 3
What do you think about cashing in mutual funds to pay down debt?
Lex: This would really depend on your personal situation. You probably bought these mutual funds as a long-term investment and depending on when you bought them, cashing out now might mean you take a loss on them since the stock market is down quite a bit. If this is an emergency (I.e. healthcare, paying for shelter/food, losing your job), sometimes you have to do what you do, but if you’re just trying to get rid of debt, it might make more sense to leave the mutual funds alone and let them grow while thinking of other ways to pay the debt (such as a side hustle). That’s because the longer your investments sit in the market, the more room they have to grow (you might have bought at a rate that you won’t see again and once the stock market comes back, you’ll do great). You also want to consider the root cause of your debt and make sure that you try to avoid getting yourself in this position again. Cashing out the mutual funds might be a quick fix, but there are only so many times you can bail yourself out if you continue to rack up debt without making lifestyle/budget changes. I hope none of this sounds judgmental as I have no details about your situation, but I want to make sure you’re in a good place for the future. If cashing them out is going to pay off the debt completely, reduce your stress, and you trust yourself never to put yourself in this situation again (if it’s in your control), then maybe it makes sense…but try other options first.
Lex’s Plugs
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Investing:
With markets down, I’ve been leaning on my Betterment Cash Reserve account. This is a high-yield savings account that you can withdraw from at any time without penalty. Betterment is offering 4% interest on Cash Reserve accounts. I’m also continuing to invest a fixed amount into the stock market every month via Betterment. Although I don’t expect near-term returns, buying into the market when it’s down helps boost long-term gains. You can email me for a Betterment referral code for investing fee credits.
I’m also continuing to invest into my Fundrise real estate account. While I don’t expect near-term returns, my lifetime return on Fundrise has been 9.7% since I began investing in 2021. Fundrise is designed to be a long-term investment option. I have referral codes that will get you $50 just for creating an account. Email me for the referral link. Note: I am not a financial advisor - these are my opinions. Do your own research as all investments involve risk.
Comment of the Week
In response to my post about gays with difficult personalities:
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