The Federal Reserve met Wednesday and held rates steady, as markets expected. Stock and bond markets largely anticipated the move, but stocks rose and bonds eased on the news. The Federal Reserve said that progress has been made to reduce inflation to their 2% target and Fed Chair Jerome Powell said, “a rate cut could be on the table in the September meeting.” Between this meeting and September, there will be plenty of data, with two inflation and jobs reports. Federal Reserve Meeting | AP News
Technology Earnings: Microsoft and Alphabet announced earnings recently and both stocks slumped. Revenue for both companies was strong, up 15% for Microsoft and 14% for Alphabet, from a year earlier, but both companies are seeing capital expenditures increase as they spend more to invest in artificial intelligence. Investors are concerned that the payoff for AI will take longer than expected and shares in both companies fell recently. Microsoft Earnings | msn.com Google Earnings | msn.com
Why was the CrowdStrike Outage so Bad? Microsoft announced that CrowdStrike’s software glitch was only installed on 8.5 million machines, which may sound like a lot, but that is less than 1% of all Windows operating machines. So why was it so bad? CrowdStrike outage - Microsoft
- Cost of Software: CrowdStrike’s software monitors company networks against viruses and ransomware and operates alongside the Microsoft Operating system. The cost of the software can be as much as $50 per machine so companies typically only install it where it is needed – on essential and critical computers that run entire networks. When those machines go down, everything follows.
- Deploying a Fix: The issue of the software glitch was identified early, and updated code was released, however, the fix could not be deployed remotely or automatically. IT staff needed to be physically present to manually reboot each machine. Some staff and companies did not have the proper access or ‘keys’ handy to manually reboot machines, furthering delays. Some machines needed to be rebooted as many as 15 times. CrowdStrike Crash | Stanford Report | Global IT Failure | yahoo.com
So, what does this mean? The economic impact of this cyber outage is large, with estimated losses potentially as much as $10 billion. Cybersecurity insurance providers will likely foot the bill. Warren Buffett, in true ‘Oracle of Omaha’ fashion, warned earlier this year that the issuance of cybersecurity insurance policies should be limited as it is becoming harder to predict the potentially catastrophic costs of large cyber outages. Berkshire Hathaway is one of the largest insurance providers in the world, owning outright and portions of insurance companies like GEICO and Chubb Insurance. CrowdStrike Losses | cnbc.com
For CrowdStrike’s CEO, George Kurtz, this isn’t the first time the CEO was involved with a worldwide computer outage: in 2010, Kurtz was the Chief Technology Officer for McAfee when they deployed a similar Microsoft update and crippled machines. This points to a history of a lack of quality control and assurance before updates are deployed. This may mean updates are deployed on a smaller percentage of machines going forward or companies and their IT providers test for themselves how critical updates may impact machines. With our dependence on modern conveniences, technology isn’t going away, and it is clear how interwoven and complex our systems are.
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Financial Planning/Investment Strategy Corner:
Current Housing Market: A recent review of home price appreciation since March 2020 revealed Maine and New Hampshire each had three housing markets in the top 50 with prices up the most in the United States: 50 Markets with House Price Increases Since March 2020 | resiclubanalytics.com. Augusta, Maine has seen one of the largest increases in the United States, with prices up 78.4%. Here is some advice for first-time home buyers:
- Make sure you’ve saved enough for a down payment, built a strong credit score, and can afford the mortgage and maintenance costs that come with owning a home.
- Consider the financing and mortgage options available to you. With the Federal Reserve potentially lowering interest rates, it may make sense to look at adjustable-rate mortgages now that track interest rates. We’ve heard catchy phrases like “marry your house but date your mortgage”, meaning refinancing later is a possibility if rates come down but make sure it’s the home you want.
- Be patient. Some may feel the urge to rush into a home with prices increasing at the pace they have recently. Prices may not rise as fast going forward and what’s important is to make sure it’s the home you want. With interest rates coming down, there may be more demand for mortgages but that may also mean there may be more supply coming to the market. Current homeowners have been less inclined to sell their homes in this market because they are locked in at lower interest rates. If interest rates begin to come down from current levels, it may be more tenable for homeowners to sell and for them to ‘date’ another interest rate. 7 Steps to Affording a Home in Today’s Real Estate Market | Morningstar
Quick Hits:
- This is an interesting article on what the impact of cars had on neighborhoods and parents: What Adults Lost When Kids Stopped Playing in the Street | The Atlantic
- There are some good uses for social media, after all: Art Historian Discovers Long-Lost Portrait of Henry VIII in Background of Social Media Post | smithsonianmag.com
- Here is what the 2024 Olympic medals are made from, including pieces of the Eiffel Tower: Olympic Medals | distractify.com
- Some important economics lessons, taught in the cost of dumplings: Where Xiao Long Bao are Cheapest | axios.com
- I enjoyed these ideas: How to Defend Yourself Against the Meeting-Industrial Complex (getpocket.com). In particular: This Is What Happens To Your Brain When You're In Back-To-Back Meetings | HuffPost Life
Quote: “We do not play chess as if we were a grandmaster, invest as if we were Warren Buffett, or cook like an Iron Chef. It is more likely we cook like Warren Buffett, who loves to eat at Dairy Queen.” – Richard Thaler
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