🎢 A Rollercoaster Day for Stocks

What’s on the Menu 🍴

Today we remember the victims of 9/11…

And look at some recent volatility in the markets.

Let’s take a look at some nuggets of wisdom and insight to price action.

• What’s Your Real Wealth Score? 🗠

• A Rollercoaster Day for Stocks 🎢

• Are Bitcoin ETF Outflows a Red Flag? ₿

Today’s newsletter is a 5 minute read.

What’s Your Real Wealth Score? 🗠

When it comes to measuring wealth, the numbers can be deceiving.

We often compare ourselves to others based on income, net worth, or assets…

But here’s the kicker:

None of these metrics tell the whole story.

What really matters is how your wealth aligns with your lifestyle—let’s call it "lifestyle-adjusted wealth."

Think about it…

Someone living in an expensive city with sky-high rent and a penchant for dining out might need a six-figure salary just to stay afloat.

On the flip side, someone who’s optimized their life with minimal expenses or is living overseas in a low-cost paradise could be living like royalty on half that income.

The takeaway?

Your “wealth” isn’t just a number—it’s how much that number allows you to do the things you love.

Let’s break it down further.

A debt-free individual with modest savings might actually be better off than someone with a higher net worth but drowning in mortgage payments and student loans.

Your spending habits, the cost of your lifestyle, where you live, how many people rely on you financially, and your investment choices all play critical roles in defining your true wealth.

The concept here is simple but often overlooked:

Adjust your perception of wealth to fit your lifestyle.

Wealth isn't about keeping up with the Joneses; it's about making your money work for you, not the other way around. If you’ve structured your finances in a way that minimizes stress and maximizes happiness, congratulations—you’re wealthier than you think.

So, next time you feel the urge to compare your financial situation to someone else’s, remember to adjust for lifestyle.

Your goal shouldn’t be to just grow the numbers; it should be to grow the value those numbers bring to your life.

A Rollercoaster Day for Stocks 🎢

A lot happened in the stock market on Tuesday, though casual observers might not have known just from looking at the close price of the S&P 500 index.

While large cap stock indices finished positive and small cap indices finished flat, there was a big intraday spike in the volatility index (VIX):

Bank stocks were under heavy pressure at one point, after Ally Bank (ticker: ALLY) spoke about rising consumer auto loan delinquencies at a conference.

The Ally CFO said: “Our credit challenges have intensified over the course of the quarter. In July and August, we saw delinquencies up about 20 basis points versus our expectations…our sense is that's probably going to expand in coming months, just given the size of this population of struggling borrowers”

This stoked investor fears that parts of the economy are indeed weakening, and ALLY stock ended the day down over 17%.

Interestingly, the banking industry also received some good news from the Federal Reserve on Tuesday.

The Fed is softening their new bank capital requirements, known as Basel 3 Endgame.

These regulations will require banks to hold more equity capital on their balance sheets, but the amounts will be about half of what was initially proposed last year.

That news helped the major bank stock ETFs pare losses to finish the day down less than 1%.

Another sector that was deep in the red on Tuesday was energy.

Crude prices continued their recent slide, finishing down over 3%.

Concerns about a slowing economy as well as selling from financial participants have weighed on crude futures, which are down more than $10 per barrel in the past month:

Gasoline futures also fell further below $2 per gallon, despite a developing hurricane in the Gulf of Mexico which could cause some short-term refinery closures.

On the positive side, the Nasdaq ended the day up almost 1%, with a number of stocks rallying into the green after midday.

Treasury bond yields fell again, which also helped interest rate sensitive sectors such as REITs have a strong day.

We could see more volatility and sector dispersion after the release of the US CPI inflation report tomorrow.

The inflation data could be the deciding factor for whether the Fed cuts interest rates by 0.25% or 0.50% at their meeting next week.

We’ll keep you updated on how things shake out here at the Daily Dough!

Are Bitcoin ETF Outflows a Red Flag? ₿

Bitcoin ETFs just went through their worst streak of outflows ever, and everyone’s talking about it.

From August 27 to September 6, around $1.2 billion was yanked out of U.S. spot Bitcoin ETFs over eight straight days.

But here's the kicker:

This might not be the sky-is-falling moment it appears to be. Instead, it could actually be part of a natural growth process.

ETF analyst Eric Balchunas from Bloomberg describes it as the “two steps forward, one step back” dance typical of maturing ETF markets. Nothing goes straight up, and this outflow streak represents only 3% of the total assets in these funds, which still hold a hefty $46 billion after the dust settled.

To put it into perspective, Balchunas notes that a real red flag would look more like 15%-20% in outflows, not the 3% we just saw.

Despite the recent outflows, Bitcoin ETFs have largely been a success story. These funds attracted a whopping $12 billion in net inflows during their first two months of trading, although the pace has slowed since.

Even with the $1.2 billion in outflows, it’s important to remember the context: inflows are still happening, just at a slower rate.

What’s key here is not just how much money flows into ETFs when Bitcoin is on a hot streak but how they handle outflows during downturns.

So far, they’ve shown resilience. After big sell-offs tied to events like Mt. Gox or regulatory setbacks, these ETFs have bounced back, indicating strong investor confidence.

So while the recent outflow streak might look bad at first glance, it’s all part of the game. Bitcoin ETFs are still growing, adjusting, and proving their worth as a major player in the crypto investment world.

Keep your eyes on the long game—this dip might just be a stepping stone to higher ground.

Food For Thought 🧠

"Volatility is not a risk we care about.
What we care about is avoiding the permanent loss of capital."
- Charlie Munger

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.