The past year has been one full of contradictions.
With the recession drum beating, rising interest rates and a sharp sell-off in the stock market, retail sales have risen 6.5% over the past 12 months, trailing a 7.1% increase in the cost of living.
There are plenty of reasons to cut spending in 2023, and others. The Bureau of Economic Analysis said the personal savings rate, or the percentage of disposable income that individuals save as a percentage of disposable income, or the share of income that remains after taxes and spending, fell to the third quarter from 3.4% in the second quarter 2.4% of .
That was the lowest level since the subprime-triggered Great Recession and the eighth-lowest quarterly personal savings rate on record (since 1947). After adjusting for inflation, savings are down 88% from their 2020 peak and 61% from before the pandemic, according to government data. The personal savings rate hit 2.4% in November, compared with 2.2% in October.
Are people buying stocks during a bear market, or have they depleted their pandemic-era savings? For whatever reason, smarter investment and spending decisions appear to be the most prudent course of action, especially given the uncertain economic outlook for 2023.
There are signs that people are already cutting some spending. While retail sales rose year-on-year, they fell 0.6% month-on-month in November, the biggest drop in almost a year, largely due to weak auto sales.
About those new cars: According to the joint forecast of JD Power and LMC Automotive, total new car sales in 2022 are expected to reach 13,687,000 units, down 8.4% year-on-year. MarketWatch reporter Philip van Doorn explains all the reasons why you might not want to buy a new car in 2023, aside from higher prices.
So, where else can you save money in 2023? The authors of MarketWatch offer the following advice.
SPACs (Special Purpose Acquisition Companies)
During the COVID-19 pandemic, people like to buy special purpose acquisition companies known as SPACs. According to SPAC Insider data, in 2021, 613 SPACs will be listed on US stock exchanges through IPOs. In the previous year, there were 248 SPAC IPOs. Never before have more than 100 SPACs been listed in a single year. There are SPACs with ties to Donald Trump and Selina Williams. There are so many SPACs that one simply calls itself “Another Acquisition Corp.”
SPACs exist as a means of taking private companies public and, in theory, provide these shell companies with a faster and less regulatory burdensome means of accessing public capital. The U.S. Securities and Exchange Commission (SEC) warned investors last April that purported advantages of the SPAC process, such as reduced legal liability, may not prove so reliable if they are reviewed in court.
Even though SPACs don’t have actual commercial operations or businesses, they raise money and try to use that money to buy something that actually exists. But a recent study showed that investors who bought SPACs that acquired private companies since 2015 suffered an average loss of 37% one year after the merger. SPACs and newly issued ETFs (SPCX) are down 12% this year.
Predictably, the mania for SPACs has died down, and if you see one, stay away from it.
—Nathan Vardi
Cryptocurrency
There are two main reasons for not investing in cryptocurrencies in 2023, neither of which has anything to do with the sharp drop in prices of most major cryptocurrencies in the last year, including but not limited to Bitcoin, Ethereum, and stablecoins. Investors have long been used to buying the dip, finding value where others dare not, and then making money on the upside.
But crypto is different because it has no correlation to the market theory of long-term holding, and buying cryptocurrencies is more of a speculation than an investment. It might sound like a semantic distinction, but if you look at financial planning holistically, then you think of investing as a risk tolerance exercise — and cryptocurrencies are all risk.
Which leads to another major reason to avoid buying crypto next year: If you do buy crypto, you actually have no safe way to store it. There is no federal insurance to guarantee a failed transaction, and individuals have little protection against cyber theft. Being on your own is not a good place to put your money.
—Beth Pinsker
Meta Quest headset
On the consumer side, if you really like virtual reality, there’s nothing wrong with using the META Quest 2 and META Quest Pro headsets, which are coming out in 2022 from the META platform (META).
The problem is that you might feel like you bought a BlackBerry in early 2007. Apple is expected to finally demonstrate what the Silicon Valley giant’s engineers have been brewing in a years-long augmented and virtual reality project. Consumers should at least take a look at what Apple is trying to do this year, if not buy anything the company makes.
The headset doesn’t come cheap, either, with Meta saying earlier this year that it would raise the price of the Meta Quest 2 by $100, to $399.99 (128GB) and $499.99 (256GB), respectively. The release of the iPhone 15 years ago changed the way people looked at smartphones, and Apple’s expected entry into virtual reality in 2023 may have those spending money on a Meta Quest headset looking forward to a new reality.
—Jeremy Owens
Net red stocks
Companies whose business models appear to some to be dying and/or struggling typically underperform in the stock market. But during the new crown epidemic, the stock prices of these companies have risen sharply. What drives them is sentiment on social media, where hordes of retail investors on platforms like Reddit drive stock prices soaring.
These influencer stocks include video game retailer GameStop (GME), movie theater chain AMC (AMC) and smartphone dinosaur Blackberry (Blackberry). AMC recently announced the sale of $110 million worth of stock, bringing its total sales to more than $2 billion since the theater chain was caught up in the online celebrity stock frenzy. Chief Executive Adam Aron (Adam Aron) wrote on Twitter that the reduction left the company with a “very strong cash position.”
GameStop recently reported its seventh straight quarterly loss and reiterated its goal of returning to profitability in the near term, but analysts have said many challenges lie ahead. During the company’s most recent third-quarter conference call, GameStop CEO Matt Furlong said GameStop would be open to exploring the possibility of acquiring strategic assets or free-to-play businesses if the price is right.
In a stock market boom fueled by ultra-low interest rates, buying such influencer companies can be lucrative for some. But we’re in a bear market with high interest rates, corporate fundamentals are back in fashion, and “quirky” investing philosophies like emphasizing cash flow are making a comeback. More likely, the days of buying influencer stocks are over.
—Nathan Vardi
Tesla car
Tesla has been the sweet spot for electric vehicles in recent years, while other manufacturers have struggled to bring them into mass production. But by 2023, there should be a wider variety of EVs, and prices are expected to trend down as the year progresses. Tesla prices range from $46,990 for the Tesla Model 3 to $138,880 for the Tesla Model X Plaid.
As major automakers such as GM, Ford Motor, Toyota and Volkswagen enter the fray, younger Tesla followers such as Rivian Automotive, Lucid Group and Fisker are expected to Production of cars will also start, and consumers will have more options for electric vehicles.
Tesla, meanwhile, has made little progress on product upgrades since the Model 3 launch in 2017, and has raised prices to what the company’s chief executive, Elon Musk, has admitted is “embarrassing.” Tesla has stated that its goal is to provide mass-market pricing for electric vehicles.
The average price of a new electric car is $64,249, compared with $48,281 for a new gas car, according to Liz R. Najman (Liz Najman) said that for many years, there have not been many options for electric vehicles other than Tesla, and 2023 seems to be the year of change.
—Jeremy Owens