💰 5 Fact Friday: Leverage Is The Name Of The Game

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POLITICS
1. Trade War Tensions Are Back 🔥

Well, that escalated quickly.

After a relatively quiet stretch on the U.S.–China front, the trade war roared back into headlines last week — and markets didn’t like it one bit.

Let’s rewind:

1. Thursday: China’s Commerce Ministry rolled out fresh export controls on a group of rare earth minerals. The rules? Aggressive yet vague. The timing? Strategic.

2. Friday: President Trump responded by threatening 100% tariffs on Chinese imports and questioning his planned meeting with Xi. In a matter of minutes, stocks tanked, crypto plunged, and $2 trillion in market cap evaporated.

3. Through the weekend: The tit-for-tat continued. The White House sanctioned Chinese firms tied to Iranian oil. Beijing announced a Qualcomm antitrust probe. China slapped new port fees on U.S. ships. Washington responded with its own.

Then, just as tensions peaked, Trump posted a calming note on Truth Social:

Of course, it didn’t take long for him to reverse course (again). By Wednesday night, Trump declared, “We’re in one now,” referring to a U.S.–China trade war.

So what’s really going on? Leverage games.

Every time high-level negotiations loom, both sides make moves to gain the upper hand. China flexes rare earth dominance. The U.S. threatens tariffs. The markets freak out. Then cooler heads usually prevail.

Here’s the reality: The U.S. has significantly reduced its reliance on Chinese goods, from 22% of imports in 2018 to just 12% today. But that doesn’t mean we’re in the clear. Rare earths and advanced tech remain critical dependencies, and that’s what makes this game of chicken so volatile.

My take? There’s real risk, especially to global supply chains, but we’ve seen this movie before. The worst-case scenario (a full-on decoupling) still feels unlikely.

Side note: India is pulling back on Russian oil purchases. That could prompt the U.S. to reconsider its 50% tariff and reopen trade talks between the two nations. Stay tuned.

CRYPTO
2. $20 Billion… Gone In A Flash 🧨

If you blinked last weekend, you might’ve missed the biggest crypto wipeout ever.

A cascade of liquidations torched over $20 billion in leveraged positions within 24 hours — bigger than the FTX bankruptcy, bigger than the COVID crash, bigger than anything.

Trump’s tariff tweet caught markets off guard and overconfident.

The result? A flash crash of epic proportions.

• Bitcoin: Dropped from over $125K to below $104K in an hour

• Ethereum: Plummeted to ~$3,600

• Altcoins: XRP, Dogecoin, and Cardano fell up to 30%

• Market cap: Crypto lost $1T in market cap at one point, and remains $660B below last week’s highs

What caused the carnage? Leverage. Lots of it.

Here’s how it works:

Say a trader bets $10K with 10x leverage. That means they’re borrowing $90K to control a $100K position.

If the price goes up 10%, their position becomes worth $110K. The trader repays the $90K loan and walks away with $20K. (Result: 100% gain)

But if the price falls just 10%?

The position drops to $90K, so the exchange auto-sells (liquidates) the position. The full $90K goes back to the lender, and the trader’s $10K is gone. (Result: 100% loss)

Now imagine that happening millions of times.

• Over 1.6M traders were liquidated

• More than $20B in leverage was wiped

• Most of it? Long bets on Bitcoin and Ethereum

This kind of chain reaction fuels extreme swings. As prices fall, liquidations accelerate the drop, which triggers more liquidations — creating a brutal feedback loop.

My take? The obvious lesson is to skip leverage. It’s a casino game with fast wins and faster exits.

The less obvious lesson is to avoid tight stop losses. Given crypto’s volatility, stop losses will often kick you out at maximum pain right before the rebound.

Remember: The market doesn’t reward emotion. It rewards staying power.

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MARKETS
3. Banks Blow Past Expectations 📈

Earnings season kicked off this week, and the big banks came to play. On paper, it was a blowout:

✅ $41B in Q3 profit across the 6 largest banks
✅ Consumer spending remains strong
✅ Investment banking is back

Breaking Down the Big 6

J.P. Morgan: Shares slipped despite a 12% jump in profit to $14.4B and a $700M revenue beat. Trading revenue hit $9.4B (+15%), card lending rose 12%, and the bank raised its full-year net interest income forecast to $92B.

Bank of America: The bank posted a 31% rise in earnings per share and 11% revenue growth, powered by strength in sales and trading. Investment banking and underwriting fees climbed double digits, helping the stock rally toward a 52-week high.

Morgan Stanley: Revenue rose 18% and profit surged 45% as the wealth management division hit record highs. Plus, CEO Ted Pick called the investment banking outlook “up and to the right.” MS beat earnings by its widest margin in nearly five years.

Goldman Sachs: Profit leaped to $4.1B (+37%) as investment banking fees soared 42%. But the trading business underperformed versus estimates, and the stock dipped.

Citigroup: Every business line hit a quarterly revenue record. Net income rose 15%, with banking revenue up 34%, services up 7%, and trading up 15%.

Wells Fargo: The biggest gainer of the bunch. WFC raised its guidance after regulators finally lifted its $1.95T asset cap, a punishment for its 2018 fake accounts scandal.

Deal Boom ≠ Economic Boom

Banks are often seen as bellwethers for the economy because they touch nearly every sector through lending, investing, and consumer activity. But this quarter’s strength may not reflect the broader economic picture.

The biggest gains came from investment banking and deal activity, which suggests the results were driven more by market conditions and lighter regulatory pressure than by Main Street momentum.

There was even one “yellow flag” hidden beneath the surface. Several banks increased their loan-loss reserves (i.e., the money they set aside for future defaults) in response to rising strain among younger and lower-income borrowers.

Overall, consumers still look healthy, but stress is creeping into some household balance sheets.

PERSONAL FINANCE
4. Prep Your Portfolio For Rate Cuts 🔑

The Fed’s next rate cut is widely expected at the October 29th meeting. While everyone’s arguing about whether inflation or recession comes next, smart investors are already positioning for the new cycle.

Rates took the elevator up, but they’ll take the escalator down. So, how do you make that ride profitable?

Here are five money moves worth considering:

1) Lock In Those Yields

Long-term bonds are finally paying more than short-term bonds, as they should.

This makes it a prime moment to build a bond ladder: stagger your cash into short-, intermediate-, and long-term bonds. This strategy helps reduce reinvestment risk while also keeping some liquidity on hand.

2) Keep Your Credit Score In Fighting Shape

If refinancing is on your radar, this could be your window. But don’t jump at the first rate drop.

A good rule of thumb: your new rate should be at least 0.5% to 1% lower than your current one to justify the closing costs.

Start polishing your credit score now, so when the math checks out, you’re ready to lock in the savings.

3) Don’t Get Suckered Into Mortgage Points

If you’re house hunting, skip the mortgage points for now. Rates are likely coming down, which means refinancing could be in your future. Paying upfront for a lower rate might not be worth it if you end up refinancing in a couple of years anyway.

4) Diversify Your Fixed Income Like a Pro

No one has a crystal ball, so cover your bases by diversifying fixed-income maturities. Mix up your short- and long-term bonds, CDs, or treasuries. That way, no matter where rates head, you’ll have decent returns locked in.

5) Lean Into Dividend Stocks and REITs

As rates drop, income seekers may shift from bonds to equities. Dividend payers, utilities, and REITs tend to benefit when investors chase yield. A modest allocation here could boost your income potential.

The bottom line? Rate cuts may be picking up steam, but you’ve still got time to play offense. Stay flexible, diversify across maturities and assets, and get your portfolio ready for the Fed’s next chapter.

STOCKS
5. Guess That Stock 🕵️‍♂️

This luxury automaker has built its entire brand on scarcity, speed, and status. But even legends can have a rough stretch on Wall Street.

Can you guess the stock?

1. This carmaker is headquartered in Maranello, Italy. Its factory, test track, and museum are defining landmarks of the small town.

2. The brand limits production to ~14,000 vehicles per year. It famously aims to build “one less car than the market demands.” Prices span from $220,000 to several million.

3. The company recently scaled back its electrification roadmap and issued cautious long-term guidance. The stock promptly crashed 15% in its worst trading day ever.

4. Its first fully electric model is set to arrive in 2026. It will deliver over 1,000 horsepower and 330 miles of range — with a price tag around $550,000.

5. The ticker symbol is $RACE. It’s a fitting reference to the company’s Formula 1 legacy and obsession with speed. 🏎️

Got a guess? Tap here for the answer → 

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