Americans' Pandemic-Era 'Excess Savings' Are Dwindling for Many; This Banker Is Minting Money in the Fintech Boom; The Mutual Fund That Ate Wall Street; Met Museum Removes Sackler Name; A typical Whitney 'rest day'
1) A fascinating chart in this New York Times article, Americans' Pandemic-Era 'Excess Savings' Are Dwindling for Many, shows how the three rounds of stimulus checks boosted household savings, with the greatest percentage benefit among the lowest-income households. But now there's concern that "many low-income Americans find their savings dwindling or even depleted":
Excerpt:
Infusions of government cash that warded off an economic calamity have left millions of households with bigger bank balances than before the pandemic – savings that have driven a torrent of consumer spending, helped pay off debts and, at times, reduced the urgency of job hunts.
But many low-income Americans find their savings dwindling or even depleted. And for them, the economic recovery is looking less buoyant.
Over the past 18 months or so, experts have been closely tracking the multitrillion-dollar increase in what economists call "excess savings," generally defined as the amount by which people's cash reserves during the COVID-19 crisis exceeded what they would have normally saved.
2) I'd never even heard of Steve McLaughlin, founder of fintech banking boutique Financial Technology Partners. The Wall Street Journal had a remarkable story this week about his success and the innovative ways he's achieved it: This Banker Is Minting Money in the Fintech Boom. Excerpt:
An early deal that put the firm on the map was for Lynk Systems, a credit-card processor. According to Mr. McLaughlin, the company had previously hired Merrill Lynch to find a buyer and fetched an offer of around $150 million. He promised to beat it. In return, Lynk offered him 5% of any deal price over $300 million. Mr. McLaughlin all but moved into a hotel near Lynk's headquarters in Atlanta. In 2004, the company was sold to Royal Bank of Scotland for $525 million.
That became Mr. McLaughlin's blueprint: Find companies that are opaquely valued or misunderstood. Negotiate unusual fee structures. And only represent sellers, never investors or potential acquirers. It is a lesson Mr. McLaughlin said he learned from his mom, a realtor. "Always get the listing," he said...
Some of FT Partners' biggest wins took more than a decade. When AvidXchange approached Mr. McLaughlin in 2009 for help raising $5 million, he said it wasn't worth the time. He changed his mind when the company agreed to sign an engagement letter that guaranteed FT Partners a role on any deal the company did for the next 50 years. He also joined AvidXchange's board of directors.
AvidXchange went from a few million dollars in annual revenue in 2009 to $186 million in 2020. An October IPO valued the commercial-payments company at about $5 billion. On top of the stake Mr. McLaughlin owns in the company, FT Partners collected a roughly 6% fee on the $1 billion it helped AvidXchange raise over nearly a dozen years.
Mike Praeger, AvidXchange's chief executive, said Mr. McLaughlin did plenty of work for the company outside of fundraisings, including late-night phone calls and weekend flights to North Carolina to map out strategy. He also said Mr. McLaughlin talked him out of selling the company at prices well below its current market value.
3) Another very interesting story in the Wall Street Journal about the largest index fund in the world – by far – and how it affects stocks and markets: The Mutual Fund That Ate Wall Street – Based on an Index Few People Know About. Excerpt:
Everyone knows the New York Stock Exchange. And its rival, Nasdaq.
But there is a mutual fund that invests in stocks based on a relatively unknown market index that has grown so large it might be considered a third stock market unto itself.
That fund is the $1.3 trillion (yes, trillion, including all share classes) Vanguard Total Stock Market Index Fund (VTSAX) and its exchange traded-fund shares. The fund, from Vanguard Group, now accounts for 10% of all assets in U.S. stock mutual funds and ETFs in the market, according to Morningstar. No other mutual fund or ETF comes close to it in asset size. The next largest is an $821 billion Vanguard S&P 500 Index fund.
The paradox is that this biggest beast among funds is tied to the most unassuming of stock indexes – the CRSP U.S. Total Market Index, developed at the University of Chicago's Booth School of Business.
While many investors may not be familiar with CRSP, the influence of the index and the Vanguard fund is felt minute to minute on Wall Street. Traders say they sometimes check the Vanguard fund's ETF version, with the symbol VTI, to get a better idea of what is happening in the market overall, since it effectively covers more stocks than any of the three major indexes – the Dow Jones Industrial Average, S&P 500 Index and Nasdaq Composite.
"When the stock market is open, VTI gives you a better picture of what it's doing than anything else," says Rick Ferri, an investment adviser in Georgetown, Texas. The CRSP, he adds, "drives this gigantic mutual fund, and most of the general public doesn't even know that CRSP exists."
4) Far too little, far too late, but good to see nevertheless: Met Museum Removes Sackler Name From Wing Over Opioid Ties. Excerpt:
In the wake of growing outrage over the role the Sacklers may have played in the opioid crisis, the Metropolitan Museum of Art and the Sackler family jointly announced on Thursday that the Sackler name would be removed from seven exhibition spaces, including the wing that houses the Temple of Dendur...
The announcement marks a significant break between the world's largest museum and one of the world's biggest benefactors, a potent symbol of the upheaval underway at cultural institutions over where their donations come from...
Nan Goldin, a photographer who overcame an OxyContin addiction, has led demonstrations at institutions that receive Sackler money; in March 2018, she and her supporters dumped empty pill bottles into the Sackler Wing's reflecting pool.
Goldin, who in 2017 founded the anti-Sackler advocacy group PAIN with a group of artists, activists, and people living with addiction, on Thursday said she was "gratified" by the Met announcement. "This doesn't actually help the overdose crisis, but at least it holds the source accountable," she said in a telephone interview. "This is part of the change that needs to be coming."
5) We had a rest day in Baños, Ecuador yesterday, so I sat around and caught up on e-mails...
NOT!
The words "rest day" aren't in my vocabulary, so I did some research, discovered that there's good river rafting on the nearby Pastaza River (lots of class III and IV rapids), and invited my new climbing buddies to join me. We were on the river for about 75 minutes and, as you can see from the pictures below and video I posted here, (check out my backflip off the raft at 2:02), we had a blast!
We returned at 2 p.m., which was just in time to go paragliding. (Unfortunately, I couldn't persuade any of my friends to join me.) I'd done it once before in Jackson Hole, Wyoming, in the summer of 2008, so I knew it would be a lot of fun – and it was amazing! Below are pictures, and I posted a video of my flight here.
I've posted additional pictures of both adventures on Facebook here.
The prices were about a fourth what they'd be in the U.S. – $30 for rafting and $60 for paragliding!
Best of all, I was able to have a little fun with my family. Before I took off paragliding, I texted them a photo of the launch point and valley behind it with this note:
I'm about to run off this hill strapped to a paragliding instructor! If I don't make it, I love you all and hope you enjoy my $10 million of life insurance! 😜👍💪🙏🤞🤣❤️
My oldest daughter replied (to my delight):
I'm glad you think you're funny.
I responded:
I want you guys to spend at least half of the $10 million on the biggest destination funeral ever – invite my 1,000 closest friends and do some EPIC sh*t! 😜🤣💪
After my flight, I followed up:
You're going to have to put off that party – I'm alive! It was AWESOME! Wait until you see the videos...
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.