The Latest Example of What We Can Look Forward To

Robinhood, the stock trading app that was so hot a year ago, announced that it is laying off around 23% of its workforce. This is its second significant layoff. The first was 9%. The layoffs will be primarily in operations, marketing, and program management. They blamed “deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash.”

Why does that matter? As I said in Tuesday’s blog post, the financial advisory market has a history of shrinking months before recessions and subsequent market downturns. Robinhood is not in the financial information business, like we are, but it’s Fintech, which is close.

I see this as another indication of what’s to come. Click here.

If you lost money investing in Robinhood, you should have been reading the advice of my friend and colleague Charles Mizrahi, who pointed out the company’s weaknesses last year. In this short article, he explains why it was a bad “play” to begin with, click here. [LINK]

More Bad Economic News

US household debt increased by 2% to $16.2 trillion at the end of June. Given 123 million households, this means the average family debt grew by nearly $10,000 last year. That’s significant.

Also worrying: Debt delinquencies are up. The biggest factors are mortgages, auto-loans, and credit card balances. (Credit card balances jumped by 13%, the largest increase in more than 20 years.) Add to that the fact that the Fed has finally begun to raise rates, which will make repaying current debts more difficult.

What that means: The combination of higher household debt and higher interest rates on mortgages means that sensible people will be spending less on all discretionary expenditures, and senseless people will be quickly spending their way into bankruptcy. Both of these trends will make it more difficult for us to stop our currently shrinking GDP.