POP QUIZ

Costco, known for its big stores and $1.50 hot dogs, also sells gold bars. How much did the wholesaler sell in one recent quarter? (Read to the end to find out!)

IN THE NEWS

🙃 A Bitcoin ETF is a Mixed Bag

Gif by bitrefill on Giphy

Regardless, accessing bitcoin through ETFs, which trade like stocks, is widely seen as an inevitability at this point, and it’s presumably a matter of crossing the last t’s and dotting the last i’s.

• No bitcoin ETF approval in the coming days would be a surprising pivot to most market participants.

To the moon: Those excited about spot bitcoin ETFs see an opportunity to make investing in bitcoin a simpler, more widely accessible process, particularly for professional investors and financial advisors.

• They can invest their clients’ assets in bitcoin without having to store the digital asset themselves or use futures-based bitcoin ETFs or the Grayscale Bitcoin Trust, which fail to reliably track the current price of bitcoin.

• Bitcoin’s price has rallied over 40% in the last six months, largely in anticipation of an ETF approval. Anticipation of the upcoming “halving” in April, where the supply of new bitcoins being mined is cut in half, has also spurred excitement.

NGU: If you’re primarily into bitcoin for “number go up (NGU),” as the popular meme goes, then this is great news — more money will undoubtedly flow into buying bitcoin, pushing its price in dollars higher.

Yet, others wonder whether turning bitcoin into a Wall Street product defies the vision behind its original conception.

• Put differently, if bitcoin was imagined as the foundation of an alternative financial system, inspiring the emergence of the broader crypto industry, does uniting it more closely into the existing financial system run afoul of its purpose?

Why it matters:

It’s a question Bloomberg’s Matt Levine recently mused about, saying crypto’s main story in 2024 has overwhelmingly been: “People want to be able to put bitcoins into a box and then sell shares of the box to regular investors in the regular financial system using their regular brokerage accounts.”

The “box” is, of course, a playful reference to ETFs. This box exposes investors to bitcoin’s price swings without actually having to own bitcoin itself.

• He adds, “Everyone own(ing) bitcoin through a BlackRock ETF in their Fidelity brokerage account isn’t quite proof that crypto is the financial system of the future.” 

• Arguing further, Levine says that a bitcoin ETF would “transmute bitcoin — this decentralized, disintermediated, trustless, novel form of money that was meant to replace the banks and brokerages — into regular stocks.”

Read more (what to expect after an ETF approval)

💰 Required Retirement Income Has Never Been Higher

Living the good life in retirement. Photo by Julius Yls on Unsplash

Older people must take money out of their pretax 401(k) and individual retirement accounts yearly, aka required minimum distributions or RMDs. The amount varies depending on the individual’s balance divided by their life expectancy. 

As many retirement account balances hit new highs over the past few weeks, retirees are entering higher tax brackets, which could have ramifications elsewhere. 

• Fidelity expects required minimum distributions to hit a record $25 billion this year.

• That means the amount retirees owe in taxes will also spike.

• As one accountant noted, “Due to the record stock values at year-end, this will produce a larger 2024 IRA (individual retirement account) RMD for those who have significant IRA funds in stocks — which are most people.”

Tax brackets are adjusted for inflation, yes, but the market’s strong performance last year will also require some retirees to pay surcharges on Medicare premiums (based on income). Others might get hit with a 3.8% surtax on net investment income for those whose incomes exceed $200,000 ($250,000 for married couples). 

Not to mention, Congress recently raised the age at which people are required to start withdrawing money from tax-deferred accounts to 73, giving investors a chance to let their money grow for longer. 

Source: Bloomberg

The impacts could vary widely, but some economists expect the increase in withdrawals to trickle into increased spending on trips, home improvements, cars, and other services. 

Meanwhile, more than half of Americans feel “behind” on saving for retirement, according to several polls last year. About one-third feel “significantly behind.” About half of Baby Boomers say they don’t feel financially secure enough to step away from work, and the average American believes they need well over $3 million to retire comfortably. 

There are several strategies to lessen the impact of higher RMDs, including qualified charitable distributions, RMD exemptions, and Roth conversions. 

• Advisors should tell “clients to expect larger RMDs this year — even if the market tanks,” an analyst commented. “Most people don’t take their RMDs or even think about it, until year-end.”

• He added: “The RMDs are going to be bigger because they’re based on a larger number, and the people who will be affected the most are those with the larger IRAs, but also the oldest people, because as you get older, your RMDs — since they’re based on life expectancy — increase.”

Read more

🇮🇳 India Wanted Factory Boom, But It’s Mostly Agricultural

Photo by Jagamohan Senapati on Unsplash

India has added about 60 million new farmworkers over the past four years, partly because of a food-welfare plan feeding hundreds of millions of people. 

• The country added 13 million farm workers last year, while manufacturing jobs have stalled. Factories have struggled to hire.

• “This is catastrophic: You see millions going back to agriculture,” said one economist there. “This is the reversal of the structural change happening in our economy.”

Not according to plan: As you might presume, this isn’t exactly the ideal for India, a country of 1.4 billion people that surpassed China last year as the world’s most populous. 

• But its average per capita income of $2,400 is less than that of Bangladesh.

• Millions of Chinese people raised their living standards by moving from farms to factories. But India is appearing to deindustrialize prematurely.

One factory owner attributed the factory job shortages to the benefits workers get in their villages near the fields. It’s a trend emblematic of the problem hundreds of others in his position now face. 

• “There are hardly any workers,” he said. “Getting to full production is going to be a challenge.”

Manufacturing’s contribution to India’s GDP has dropped from around 17% in 2003 to 13% in 2022.

Why it matters:

As The Wall Street Journal reports, the trend “puts India at risk of missing out on the benefits of a huge labor force, while much of its population struggles with chronic unemployment or underemployment.”

• “It also means that the world—which benefited when China’s economy grew, fueling demand for commodities and providing consumers with cheap goods—might not be able to count on India to be as powerful an engine of global economic growth.”

In 2020, the Indian government launched an enormous welfare program by offering 5 kilos of rice or wheat each month to people impacted by lockdowns — roughly 800 million people. Economists believe the program is a leading reason for agricultural job growth.  

No end in sight: As national elections loom, the government extended the welfare program for an additional five years for $145 billion.

• As employment in Indian cities continues to fall, there are now about 260 million farm workers nationwide, only slightly lower than the number of farmworkers India had 20 years ago at its peak agricultural employment. 

Read more on how India makes money

TRIVIA ANSWER

Costco sold over $100 million worth of gold bars in a recent quarter, according to its CFO.