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In This Issue:

Inflation Mitigation (Part 1)

In June 2022, inflation surged 9.1% year-over-year, the highest rate in more than 40 years.¹

As spending power erodes, Americans are scrambling for ways to hedge against inflation. In the coming newsletters, we’ll suggest ways to protect and fight back against inflation.

Generate Your Own Power.

For homeowners, generating your own power may be a wise economic choice. After the upfront cost of installation, a solar-panel system requires little maintenance and reduces electric bills dramatically. Federal and state tax credits increase incentives, making it even more appealing. Of course, the true savings depends on several factors, including roof size and the amount of sunlight it receives. Use this calculator to estimate potential savings.

With gas prices surging, electric (EVs) and hybrid vehicles are increasingly attractive. When coupled with solar panels on your dwelling, charging your EV at home is essentially free. All major manufacturers are investing heavily in EVs and battery technology as well as rolling out plug-in hybrid models. Certain makes and models are still eligible for federal tax credits.

Crypto Meltdown

In one sense, the recent cryptocurrency tumble is nothing new. The archetypal cryptocurrency, Bitcoin, has dropped more than 50% six times since its launch in 2009. However, until now, cryptocurrencies have only known markets that are flush with cash. Between inflation concerns and Fed monetary tightening, this economic environment is different. Although dominant cryptos like Bitcoin may persist, the recent market pressure created an unavoidable downward spiral for smaller coins such as Luna and its linked stablecoin, TerraUSD, which collapsed in early May.

The fallout has affected not only the price of various cryptocurrencies, but crypto companies themselves. In June 2022, Coinbase, Crypto.com, and BlockFi, among others, announced significant layoffs.² Coinbase cut 18% of its workforce.³ U.S. Crypto lender Celsius Network filed for bankruptcy⁴ on July 13 after another crypto lender, Voyager Digital, filed for bankruptcy⁵ earlier in the month.

Will the crypto market recover? Only time will tell. In the past, the crypto market has been able to bounce back, but it has never seen the conditions present today. The lesson to investor is clear: know what you own and why.

FAQs From Our Clients:

Is gold a good hedge against inflation?

Historically speaking, gold (and other precious metals) has a very loose relationship with inflation. Stocks and real estate, on the other hand, have had a much stronger correlation.

Can Bitcoin shield me from inflation?

The recent Bitcoin crash has debunked the myth that it is like “digital gold.” Cryptocurrency prices have traded in line with riskier assets, rather than the more boring and stable gold prices.

Send us your questions to have them included in next quarter’s publication!

Mortgage Rates and the Housing Market

Mortgage rates climbed past 6% in mid-June, far outpacing Fannie Mae and the Mortgage Bankers Association expectations that rates would rise to 3.3% or 4%, respectively, by the end of 2022. Consequently, many prospective buyers have been priced out of the market. Due to higher home prices and mortgage rates, homebuyers would pay 65% more than a year ago to own the same house, according to realtor.com.⁶ Predictably, home purchase applications are down 15%.

How high can rates go? That remains to be seen. Historically, even 6% is not high. In percentage terms, however, the current rise is unprecedented.

Is an In-Marriage QDRO a Tool You Can Use?

Qualified domestic relations orders (QDROs) are most commonly used to distribute retirement assets in qualified accounts such as 401(k) plans between divorcing spouses. But did you know that QDROs can actually be used more broadly than in divorce settlements? In-marriage QDROs, under the right circumstances, can be a very useful planning tool and may significantly reduce tax liability and RMDs.

In general, in-marriage QDROs are for married couples who have significant assets in private qualified retirement plans like 401(k) or 403(b) (not IRAs), and no intention of divorce. The process of determining whether an in-marriage QDRO is right for you involves coordination of several professionals. Using an in-marriage QDRO has significant implications. If this sounds like something that may be applicable to you, let us know and we can discuss it further.

Footnotes:

¹ For more on the causes and impact of inflation, read our April newsletter.
² Business Standard – Why This Bitcoin Bear Market Is Different
³ A Message from Coinbase CEO
⁴ Reuters – Celsius Files for Bankruptcy
⁵ Reuters – Voyager Files for Bankruptcy
⁶ Realtor.com – Mortgage Rates Slam Brakes on Housing Market