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Markets 

Gold price advances further as expectations over Federal Reserve rate cut bets deepen (2 minute read)
The rapid ascent of gold prices has brought them close to the critical resistance level of $2,060, propelled by market expectations of an early unwinding of interest rates by the Federal Reserve. The optimism stems from a noteworthy upturn in the Consumer Price Index (CPI), inching closer to the 2% target, fueling speculations of prompt rate adjustments by the Fed. Despite a downward revision in the Gross Domestic Product (GDP), signaling a slowdown in the labor market and price pressures, the United States continues to exhibit stronger economic growth when compared to other G7 economies.

Mortgage demand slips despite another drop in interest rates (2 minute read)
Despite a sustained decline in mortgage rates, mortgage demand experienced a decrease last week compared to the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) dropped to 6.83% from 7.07%.

Even though rates have seen a recent reduction, they remain notably higher than the levels observed at the onset of the Covid pandemic. Despite the positive developments such as the drop in inflation and the FOMC's indication of a shift towards rate cuts, the 30-year fixed mortgage rate hit its lowest point in a while. However, there was a relatively subdued response from borrowers to this rate movement as of last week. Despite the dip in demand, the Mortgage Bankers Association remains optimistic about the market's future, foreseeing positive developments despite anticipating a "mild recession" in the first half of the coming year.

Visualizing 60 Years of Stock Market Cycles (2 minute read)
The current state of the stock market is characterized by its peculiarity. Despite a backdrop of robust economic growth and increasing interest rates, the S&P 500 has surged by over 24% to date. Interestingly, the unemployment rate remains low at 3.7% as of November, and inflation has shown signs of moderation.

Understanding market dynamics involves recognizing the cyclical nature of bull and bear markets. A bear market occurs when a stock market index declines by 20% from its peak, and once stocks recover and surpass this peak, it enters a bull market. The duration of bear markets has historically been shorter than that of bull markets, as indicated by data since 1962. On average, bull markets have seen a return of +151.6% over 51.0 months, while bear markets show a decline of -34.2% over 11.1 months. The longest bear markets during this period were in the early 1970s and 1980s, each lasting approximately 20 months.

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Investing

Warren Buffett Just Added $589 Million to 1 of Berkshire Hathaway's Top Holdings (3 minute read)
Despite Warren Buffett's overall cautious stance on the 2023 stock market, there is one stock that has consistently captured his interest. Buffett, on the whole, been a net seller of stocks in the first nine months of the year, with Berkshire Hathaway's total equity sales amounting to $32.8 billion by the end of September, while stock purchases reached only $9.1 billion during the same period.

Buffett continued to divest Berkshire's stake in HP, selling approximately $1.3 billion of the company's stock this quarter. However, recent SEC filings reveal that Buffett has been augmenting one of his principal holdings—Occidental Petroleum (NYSE: OXY). Last week, he acquired 10.5 million shares of the oil company for approximately $589 million, bringing Berkshire's total stake in Occidental to 27.2%, with an additional $8.5 billion in preferred shares and warrants. This move coincides with Occidental's $12 billion acquisition of CrownRock, reinforcing investor confidence in Buffett's positive outlook for the deal.

Why everyone was so wrong about the 2023 economy (3 minute read)
At this point last year, a prevailing sentiment among economists, journalists, and the general public was a pervasive certainty that the United States was on the brink of a recession. The prevailing belief, shared by many economists and financial experts, was that the Federal Reserve's efforts to curb high inflation through aggressive interest rate hikes might lead to elevated unemployment and a recession, akin to the experiences of the 1970s.

Contrary to these expectations, the U.S. economy defied predictions and experienced growth throughout 2023. Additionally, the unemployment rate, while cooling off in the job market, remained low, reflecting a robust and resilient employment landscape.

What is the Safe Withdrawal Rate in Retirement? (5 minute read)
When contemplating retirement planning, the primary financial concern often centers on the fear of outliving one's savings. Addressing this concern is the concept of the safe withdrawal rate, which denotes the percentage of retirement savings that can be withdrawn annually (adjusted for inflation) without depleting funds during retirement.

Originating from research conducted by William Bengen in the early 1990s, the idea gained further credibility and popularity with The Trinity Study's release in 1998. This influential study, authored by finance professors at Trinity University, analyzed historical return data to assess the viability of different withdrawal rates. In alignment with Bengen's findings, the study concluded that withdrawal rates of 3% and 4% were highly unlikely to exhaust a portfolio of stocks and bonds during payout periods, giving rise to the widely recognized safe withdrawal rate and the 4% rule. The question today revolves around determining the current Safe Withdrawal Rate.

Money

Social Security is Not a Retirement Safety Net (3 minute read)
This years strikes and protests in France, at times causing the country to come to a standstill, were sparked by President Macron's government decision to raise the retirement age from 62 to 64. Similarly, in the United States in 2011, there was a wave of protests when Speaker Paul Ryan proposed increasing the retirement age from 67 to 69.

The sensitivity surrounding retirement age adjustments is reflected in Social Security being deemed a political "third rail," akin to the electrified rail on a railroad that carries a lethal voltage. For politicians, touching upon any potential threat to Social Security is considered a career-ending risk. Despite this political sensitivity, Social Security's origins are rooted in political rather than financial necessity, with the initial retirement age being determined by political and social considerations rather than life expectancy.

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