What Queen Elizabeth’s Death Means for the UK Economy

September 12th, 2022

Last week’s market summary (September 5th-9th, 2022):

• S&P 500: +1.82%
• Dow: +1.09%
• Nasdaq: +1.79%
• Bitcoin: +7.40%

Hey Junkies,

Here's what we're covering today:

• Queen Elizabeth's Death Comes With a Heavy Price Tag
• Mortgage Rates Hit a New High
• Thousands Tuned Into a Fake Apple Crypto Event
• Theater Chains Are Beginning to File for Bankruptcy
• Congress Has Asked the IRS to Study a Free Tax Filing Service

Here's what you need to know about each of these stories plus a quick preview of the biggest economic events coming up this week.

Clint, Editor-in-Chief

What Everyone’s Been Buzzing About

1. Queen Elizabeth's Death Comes With a Heavy Price Tag

Queen Elizabeth, Great Britain's longest-reigning monarch, was often regarded as a symbol of stability during times of turmoil and uncertainty. But her passing comes during during an especially difficult economic time for the United Kingdom.

UK inflation is at a record high and gas prices are expected to rise even further as Russia has indefinitely stopped supplying gas to Europe through the Nord Stream 1 Pipeline. As Brits face these financial challenges, Queen Elizabeth's calming presence will be sorely missed. But it turns out that the Queen's passing will also have a more direct impact on the UK economy.

Between bank holidays, stock market closures, cancellations of games and events, ceremony expenses, and the costs of updating things like coins, stamps, and passports, it's expected that Queen Elizabeth's death will cost the UK billions. Back in 2018, the Independent estimated that the funeral and coronation ceremonies alone would each cost the country between £1.2 to £6 billion.

2. Mortgage Rates Hit a New High

On September 8, the average mortgage rate for a 30-year loan in the U.S. hit 5.89%. That's the highest rate that we've seen since 2008.

Even before the new high was reached, elevated rates had already begun to affect prices. Redfin reported last week that for the four weeks ending August 28th, the average home sold below its list price. That hasn't happened since March 2021.

We expect these high rates to continue pushing prices downward through the remainder of 2022 and 2023. So if you can wait till mid-2023 or later to buy a home, you may benefit. But if that's not an option, you'll want to check out this article that lays out three unexpected benefits of buying a home when interest rates are high.

3. Thousands Tuned Into a Fake Apple Crypto Event

During Apple's real iPhone 14 event last week, a fake event was streaming on YouTube that linked to some scammy cryptocurrency sites. The stream used old 2018 CNN footage of Tim Cook, but the CNN logo was covered up and replaced with a banner that said “Apple Crypto Event 2022.” It also added the Bitcoin and Ethereum logos.

The Verge pointed out the fake stream to YouTube who quickly took it down — but not before it was able to garner up to 70,000 viewers. It seems that YouTube recommended the video to many visitors on its homepage which helped the stream attract so many eyeballs. This is yet another reminder that crypto scams are everywhere. Check out this in-depth guide to learn how to spot them.

4. Theater Chains Are Beginning to File for Bankruptcy

A few months ago we reported that theaters had a enjoyed a record box office weekend thanks to the release of multiple blockbusters within a short period. But at the time we warned that some analysts were concerned that tentpole flicks weren't being released often enough to drive the kind of year-round revenue that heavily indebted theater corporations needed.

It turns out that those analysts were correct. Cineworld, the parent of Regal Cinemas, filed for bankruptcy last week. Earlier this month, AMC shared plunged as far as 40% after it announced the issuance of a new class of shares called AMC Preferred Equity (or APE) in an effort to raise more cash. Right now, AMC's CEO continues to tout the company's liquidity, but many investors are worried that it's heading towards insolvency as well.

The fact of the matter is that fewer theater releases and lower turnouts may be our new “normal.” Last week, former Disney CEO Bob Iger said “I don't think movies ever return, in terms of moviegoing, to the level that they were at pre-pandemic.” If he's right, major film studios with their own streaming services will be fine (Disney just released its Pinocchio remake on Disney+ this week). But darker days could be ahead for theater companies.

5. Congress Has Asked the IRS to Study a Free Tax Filing Service

Tucked within the Inflation Reduction Act that passed last month was a $15 million provision that requires the IRS to study a free in-house tax filing option. The agency has 9 months to report their findings to Congress.

Such a government-backed solution could deal a heavy blow to private tax prep companies and software services. The commercial tax prep industry received nearly $12 billion of revenue in 2022, according to the Washington Post.

At this point, it's still too early to say what will come of the study or if there will be restrictions on who would be able to use the free service. Guided tax preparation for the existing IRS Free File service is only available to filers who have an AGI of $73,000 or below.

What To Keep Your Eye on This Week

August's Inflation Rate (Tuesday, September 13th)

If you've been following these weekly newsletters, you know the drill by now. Each month, the Consumer Price Index (CPI) is released. If August's rate of inflation is lower than July's (which was 8.5%), the Federal Reserve may be inclined to slow its interest rate hikes. But a higher rate usually has a negative impact on the stock market as investors anticipate continued “pain” from the Fed.

Oracle (ORCL) and Adobe (ADBE) Earnings Reports

At this point in the earnings cycle, there aren't many major companies that we're still waiting to hear from. But Oracle and Adobe are two notable software companies that both release earnings this week. First up is Oracle, which will hold its earnings call later today. Adobe, meanwhile, will announce its Q3 earnings on Thursday.

Staff Favorites

Here are three stories from around the web that you might find interesting:

• The Disaster Consultants (The Verge)
• How a Railroad Strike Could Send Food Prices Soaring (The Hill)
• Washington Weighs Plan To Let Americans Wager on Elections (Politico)

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