Crypto Contagion Continues to Spread In the Wake of the FTX Debacle

December 5th, 2022

Last week’s market summary (November 28th-December 2nd, 2022):

• S&P 500: +1.66%
• Dow: +0.45%
• Nasdaq: +2.82%
• Bitcoin: +3.76%

Hey Junkies,

The markets had a slightly positive week, thanks mostly to a big jump on Wednesday after some encouraging comments from Fed Chief Jerome Powell. But Friday’s job report came in hotter than expected, which led many to worry that the Fed may think twice about slowing its rate hikes.

Outside of the stock market, ripple effects of the FTX debacle have reached more and more companies. Here’s what you need to know about the “crypto contagion” that’s been dominating headlines as well as some of the other top financial stories of the week.

Clint, Editor-in-Chief

What Everyone’s Been Buzzing About

1. The FTX Fallout Is Still Claiming Victims

In the crypto world, one company’s demise often leads to the failure of others. The phenomenon is often referred to as “crypto contagion” and we caught our first glimpse of it in May when multiple crypto businesses crumbled in the wake of Terra’s downfall. Now we’re seeing a similar fallout from the FTX collapse.

BlockFi declared bankruptcy last week, Genesis is teetering on the edge, and Auros Global just missed a loan payment on 2,400 of wETH it had borrowed. But if there’s a silver lining to all of this bad news, it’s that it might force the surviving crypto players to become more transparent with their finances.

Several of the largest crypto exchanges in the world have now published “proof of reserves,” including Binance, Coinbase, and Gate.io. Notably, though, many of these dashboards don’t show the company’s liabilities. That’s why other exchanges such as Crypto.com and OKX have pledged to follow Kraken’s lead by undergoing full audits to provide more financial visibility.

Keep Your Money Safe: How to Spot a Crypto Scam >>>

2. Bob Iger Is Back as Disney’s CEO

In a move that shocked the entertainment industry, the Disney Board of Directors went behind then-CEO Bob Chapek’s back and asked former CEO Bog Iger if we would return to helm the company. Iger said “Yes” and he officially began his second tenure last week.

The 71-year-old Iger signed a 2-year contract and one of his biggest tasks during that time will be figuring out how to make Disney’s streaming services profitable. If you haven’t heard, those services are highly unprofitable right now and are a major reason why Disney’s stock has slumped this year.

Iger clearly has his work cut out for him. But he’s worked miracles before. His uber-successful first 15-year stint as CEO has granted him near-legend status inside the company. So if anyone can bring back that ole’ Disney magic, it’s probably Iger.

3. Some Tax Prep Sites Were Caught Sharing Sensitive Data With Facebook

The revelation was borne out of a crowdsourced study of Facebook’s Metal Pixel from The Markup.

It found that multiple tax filing companies had used the pixel to share client financial info with Facebook (such as income and tax refund data), including big names like TaxAct, TaxSlayer, and H&R Block. TurboTax was using the pixel on its site too but wasn’t sending any financial data back to Meta (although it did send usernames).

In a surprise development, virtually each company pleaded ignorance to the flow of data.

Within hours of The Markup’s report going live, sites began taking action to save face. As of Wednesday, each company had at least stopped the flow of data back to Facebook while several had removed the pixel from their websites altogether.

4. Musk’s Non-Twitter Businesses Had a Busy Week

It turns out that Musk has other irons in the fire other than running Twitter. Who knew? Here’s a quick rundown of some of the week’s highlights from his other companies:

Tesla: This week it delivered its first electric Semi truck to Pepsi. The tri-motor beast has a range of 500 miles even when loaded up with 81,000 pounds of cargo.

Neuralink: Musk hosted a big event for his brain implant company this week too. After a bit of show and tell, he revealed that Neuralink may be about “six months” away from receiving FDA approval to start human trials.

SpaceX: Speaking of government approval, SpaceX received the green light from the FCC to deploy 7,500 satellites.

So far, it doesn’t seem like Musk’s Twitter diversions have kept his other businesses from moving forward and reaching their goals. If that continues, it may eventually help warm investors back up to Tesla’s stock (which has been ravaged this year).

5. Florida Yanked $2 Billion From BlackRock in Its Latest “Anti-ESG” Move

Florida’s CFO Jimmy Patronis announced this week that the Treasury would be moving the funds to other wealth managers in response to the company’s ESG policies.

In the statement that his office provided, Patronis said “Florida’s Treasury Division is divesting from BlackRock because they have openly stated they’ve got other goals than producing returns.”

The moves come on the heels of a resolution that The Florida State Board of Administration passed in August which prohibited managers of the state’s Retirement System from factoring in ESG ratings when making investment decisions. Translation: Florida doesn’t want what it considers to be “woke politics” influencing its retirement portfolios.

For its part, BlackRock says that it’s Florida who’s actually playing politics here. The world’s largest asset manager says that its funds have delivered strong returns for the state and they never received any complaints about their performance.

Florida is the third state this year to divest from BlackRock recently and to cite the company’s ESG focus as the reason. And these state moves are actually part of a larger backlash against ESG investment strategies that we’ve begun to see over the past year or so.

What Is “ESG Investing” Anyway? Everything You Need to Know >>>

What To Keep Your Eye on This Week

Here are a few noteworthy economic events that are coming up this week:

• Monday, December 5th: Manufacturer’s Orders Report (October)
• Tuesday, December 6th: International Trade Deficit (October)
• Wednesday, December 7th: Consumer Credit Report (October)

And here are a few of this week’s prominent earnings calls:

• Tuesday, December 6th: AutoZone (AZO), BHP Group (BHP)
• Wednesday, December 7th: Campbell Soup Company (CFB), Academy Sports (ASO)
• Thursday, December 8th: Oracle (ORCL), Costco (COST)

Staff Favorites

At IJ, we know that many other publishers are creating great personal finance content. So each week we like to call out a few recent stories from our colleagues that we felt were interesting, eye-opening, challenging, inspiring…or just funny.

Here are our picks for this week:

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