April picks available soon
I’ll be publishing the Prime and Select picks for the month of April before Wednesday, April 1 (the first trading day of the month). As always, SPC’s performance measurement for the month of March, as well as SPC’s cumulative performance, will assume the sale of the March picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Tuesday, March 31).
What we’re reading (3/24)
“Dow, S&P 500, Nasdaq Futures Jump As Wall Street Hopes For Iran Progress” (Yahoo! Finance). “US stock futures climbed Tuesday evening follow a report from the New York Times saying that the US has sent a 15-point plan to Iran aimed at ending the war…Meanwhile, oil prices sank, continuing a wild ride as investors assess Iran-related developments.”
“When Hyperglobalization Meets Chaos” (Paul Krugman). “[A]re we learning that the Persian Gulf is a uniquely crucial choke point for the world economy? I don’t think so. It’s certainly an important choke point. But it’s not unique…In a classic 2013 paper — updated in 2023 — Subramanian and Kessler noted that world trade had grown much faster than world GDP between the 1980s and the eve of the 2008 financial crisis. In the 80s world trade wasn’t much bigger as a share of world GDP than it had been before World War I; by 2008 it was on a whole other level. But as they documented, this rapid growth in world trade was not simply a matter of countries trading more, but of world production becoming much more complex and interdependent…Over the past 40 years or so we’ve built a world in which national economies are so interdependent that there are potential choke points everywhere you look.”
“OpenAI Scraps Sora Video Platform Months After Launch” (Wall Street Journal). “OpenAI is planning to pull the plug on its Sora video platform, a product it released to great fanfare last year that has since fallen from public view. The move is one of a number of steps OpenAI is taking to refocus on business and coding functions ahead of a potential initial public offering as soon as the fourth quarter of this year. CEO Sam Altman announced the changes to staff on Tuesday, writing that the company would wind down products that use its video models. In addition to the consumer app, OpenAI is also discontinuing a version of Sora for developers and won’t support video functionality inside ChatGPT, either. OpenAI is in the middle of a strategy shift to redirect the company’s computing resources and top talent toward so-called productivity tools that can be used by both enterprises and individual users.”
“Software Stocks Drop On Report Amazon Is Developing AI Tools” (Bloomberg). “Software stocks dropped on Tuesday after a report on new AI tools from Amazon.com Inc. rekindled the disruption fears that have roiled the sector in the past few months.”
“Private Equity Role In Soaring Child Care Prices Under Investigation” (Washington Post). “A Democratic senator launched an investigation Monday into the nation’s two largest for-profit child care providers, as rising child care prices squeeze voters already concerned about the cost of living.”
What we’re reading (3/23)
“Dow, S&P 500, Nasdaq Futures Steady After Relief Rally On Trump’s Hint Of Iran Deescalation” (Yahoo! Finance). “US stock futures were largely flat late Monday, pausing after a sharp rebound on Wall Street that was driven by growing optimism around a potential easing of tensions between Washington and Tehran.”
“Volume In Stock And Oil Futures Surged Minutes Before Trump’s Market-Turning Post” (CNBC). “S&P 500 futures and oil futures flashed an unusual burst of activity early Monday minutes before a market-moving social media post from President Donald Trump. At around 6:50 a.m. in New York, S&P 500 e-Mini futures trading on the CME recorded a sharp and isolated jump in volume, breaking from an otherwise subdued premarket backdrop. With thin liquidity typical of early trading hours, the sudden burst stood out as one of the largest volume moments of the session up to that point.”
“The Dollar’s Strength Has Little To Do With ‘Exorbitant Privilege’” (RealClear Markets). “The U.S. dollar's role as the world's reserve currency is often portrayed as an "exorbitant privilege" granting America endless benefits like cheap borrowing and global clout. Career economists fill books and panels with this narrative, implying dollar dominance is a perpetual free lunch. But common sense reveals a simpler truth: The dollar's power stems 90% from U.S. economic fundamentals—scale, stability, productivity—with reserve perks adding modest, often net-neutral gains that balance out across society.”
“The Revenge Of Flyover Country” (The Atlantic). “[T]hese days, people are no longer flying over the Midwest. In growing numbers, they’re flying to the Midwest, to find a place to live. In the past couple of years, the region has become a popular place to relocate; three of the country’s five fastest-growing metro areas are there. Population growth in the Sun Belt, meanwhile, is slowing. The forces driving these changes go two ways: People are being drawn to more northerly cities for job opportunities and affordable housing, and they are being pushed out of the Sun Belt by the rising cost of living there.”
“America’s Original Steakhouse Is Expanding—After Nearly 200 Years” (Wall Street Journal). “When Delmonico’s first opened around the corner from Wall Street in 1837, it coincided with a financial panic, bank failures and the popping of a real-estate bubble. But the steakhouse survived. And in the coming years, it would serve famous customers such as Abraham Lincoln and Mark Twain. Now, nearly two centuries later, the restaurant that calls itself the first fine-dining spot in the U.S. is poised to open its second outpost in Midtown Manhattan next year.”
What we’re reading (3/22)
“The Fed’s Most Awkward Leadership Transition Is Coming” (Wall Street Journal). “‘He [Warsh] wouldn’t have gotten the job without indicating that he would believe that interest rates should be lower,’ said Eric Rosengren, who served as president of the Boston Fed from 2007 to 2021. ‘But the problem is that the world is changing pretty quickly, and he can’t guarantee the vote.’”
“‘It Feels Like There’s No Jobs’: 12 Gen Z Voters On The U.S. Economy” (New York Times). “‘I graduated college almost two years ago at this point, and things felt really different compared to now,’ one participant said. Another added, ‘An entry-level job is never really an entry-level job anymore.’ Participants described applying to job after job after job, and frustrations with what college didn’t prepare them for. Most had a stronger interest in a secure, imperfect position over a risky dream opportunity.”
“A Whiff Of Stagflation” (Paul Krugman). “[I]nflation has risen — not a lot so far, but it was moving in the wrong direction even before the war with Iran. The latest indicator was the Producer Price Index — basically wholesale prices — released Wednesday morning. This index can give early warning about rising consumer prices. And one of the people I trust to read these tea leaves called it ‘pretty grim.’ Not 1970s grim, but not what you want to see. There’s an uncomfortable parallel here with 1973, the year stagflation is generally considered to have started. I’m not sure how many people are aware that one reason the 1973 oil shock hit so hard was that inflation was already rising fast even before the Yom Kippur War led to the Arab oil embargo, which triggered the first oil crisis[.]”
“Global Growth Expectations Continue to Improve” (Torsten Slok). “There are no signs of a slowdown in corporate earnings expectations[.]”
“Why AI Has Not Yet Upset India’s IT industry” (The Economist). “This year’s edition of the annual jamboree for Indian IT firms, held last month in Mumbai, was a study in contrasts. The president of Nasscom, the industry body, hailed a new sales record: it expects that its members will have enjoyed combined revenue of more than $315bn in the year to March, up by 6% on the year before. Yet delegates tearing their eyes from the stage and glancing at their phones would see share prices plunging. The Nifty IT index dropped by around a fifth following a viral blogpost that imagined new artificial-intelligence coding tools would wipe the industry out altogether[.]”
What we’re reading (3/21)
“The Trillion Dollar Race To Automate Our Entire Lives” (Wall Street Journal). “What began as a way to autocomplete code quickly evolved into semiautonomous AI bots, or ‘agents,’ that can work for hours on end with little human oversight. We can tell a bot to create a presentation for work, coordinate the family’s schedules and pick a March Madness bracket, all while it learns our personal preferences, no coding needed.”
“OpenClaw’s ChatGPT Moment Sparks Concern That AI Models Are Becoming Commodities” (CNBC). “Some industry experts say OpenClaw’s breakout shows that the value in AI isn’t all accruing to the two leading startups, which have a combined private market value of over $1 trillion, and their hyperscaler peers. ‘It solidified the open-source community and proved that fully autonomous AI can be run at home without relying on the Magnificent 7 or Big AI,’ said David Hendrickson, CEO of consulting firm GenerAIte Solutions. ‘I suspect this was the black swan moment most big AI companies feared.’”
“Goldman Says It’s Eyeing The Risk Of A Deeper Market Correction That Will Leave Investors Few Places To Hide” (Business Insider). “In a note to clients on Thursday, strategists at the Wall Street firm said they were eyeing risks of a coming stock correction, which is officially defined as the market dropping 10% or more.”
“The Long Farewell To Mark Zuckerberg’s Metaverse” (New York Times). “Five years ago, Mark Zuckerberg proclaimed that the future of Facebook would be the metaverse. Based in virtual reality, it would be an immersive digital world where people could work, play and meet up, he said. To punctuate the point, Mr. Zuckerberg renamed his company Meta. But in recent months, Meta laid off 10 percent of its employees in the division that works on the metaverse and said its flagship Horizon Worlds app, a digital universe where people socialize through their avatars, was turning its focus away from virtual reality. This week, Meta delivered a near death blow. On Tuesday, the company said people would no longer be able to access the immersive world through virtual-reality headsets starting on June 15.”
“These Car Brands Could Suffer The Most With Soaring Gas Prices” (Washington Post). “In the mid-2000s, gas prices roughly doubled from about $2 to $4 a gallon as demand surged. Sales of the biggest pickups fell. The Ford F-series — including the F-150, the perennial best-selling automobile in the U.S. — saw sales drop by about 45 percent as consumers shifted toward smaller vehicles and hybrids like the Toyota Prius.”
What we’re reading (3/20)
“Dow, S&P 500, Nasdaq Sell Off To End Another Brutal Week As Iran War Rages” (Yahoo! Finance). “US stock losses accelerated on Friday, while oil prices remained high, as investors weighed the possibility that the US might try to seize a key Iranian energy terminal to unblock the Strait of Hormuz. The Dow Jones Industrial Average and the S&P 500 fell roughly 0.9% and 1.5%, respectively. Meanwhile, the tech-heavy Nasdaq Composite slid by a deeper 2% following a downbeat day on Wall Street.”
“United Airlines To Cut 5% Of Scheduled Flights As Fuel Prices Soar” (Reuters). “United Airlines (UAL) CEO Scott Kirby said on Friday the airline will cancel about 5% of this year's planned flights in the short term, as jet fuel prices surge due to the Middle East conflict. ‘If prices stayed at this level, it would mean an extra $11 billion in annual expense just for jet fuel,’ Kirby said in a message to employees posted on its website.”
“The Myspace Dilemma Facing ChatGPT” (The Atlantic). “OpenAI CEO Sam Altman made the provocative statement last week that in the future, intelligence will be “a utility, like electricity or water.” Instead of taking that claim as hubristic—as Altman claiming that smarts will be owned by OpenAI—consider a far more mundane and probable idea: AI could become, in just a few years, a commodity as invisible and anonymous as power or plumbing. Nobody cares what company makes the lights work or the toilets flush, so long as they do.”
“A Danish Fix For U.S. Mortgage Lock-in” (Marginal Revolution). “In the Danish mortgage market every mortgage is backed by a corresponding bond. Thus, if a home buyer takes out a 500k mortgage at 3% interest, a bond is issued that pays the lender 3% interest on 500k…It has two distinct advantages. The correspondence principle means that mortgage banks don’t bear interest rate risk but instead specialize in evaluating credit risk (the risk that the borrower won’t pay). Deep markets rather than banks take on the interest rate risk. This makes the Danish system very stable. Mortgages can be pre-paid by buying the corresponding bond at market rates and extinguishing it. If a Danish borrower takes out a 500k mortgage at 3% interest and then rates rise to 6%, for example, the value of that mortgage falls to $358k and the borrower can buy the corresponding bond, deliver it to the bank, and, in this way, extinguish the loan. In the US, a mortgage can be pre-paid only at a par. As a result, if interest rates rise, home owners don’t want to move because moving would require them giving up a 3% mortgage and replace it with say a 6% mortgage.”
“The 30-Year Debate Over The Minimum Wage Is Still Not Settled” (Wall Street Journal). “For decades, Econ 101 held that raising the minimum wages killed jobs. Then, in 1994, economists David Card and Alan Krueger published a paper saying the opposite. Economists have been fighting over the minimum wage ever since. Today the debate has never felt more relevant. Nineteen states raised their minimum wages in January, giving an estimated 8.3 million workers a raise. Three more follow later this year…How it all affects the job market remains deeply unsettled. At the heart of the debate: Does raising the wage floor reduce employment by making labor more expensive?”
What we’re reading (3/19)
“Jeff Bezos In Talks To Raise $100 Billion For AI Manufacturing Fund” (Wall Street Journal). “The Amazon.com founder is meeting with some of the world’s largest asset managers to raise funding for the project. A few months ago, he traveled to the Middle East to discuss the new fund with sovereign wealth representatives in the region. More recently, he went to Singapore to raise funding for the effort as well, according to people familiar with the matter.”
“Wall Street Faces A $5.7 Trillion Triple-Witching Jolt On Friday” (Bloomberg). “Wall Street equities traders are bracing for an unusually large tally of options expiring on Friday, which risks injecting even more volatility into a market that’s seen weeks of turbulence amid the raging Mideast conflict.”
“Can Companies Buy Their Way Into The S&P 500?” (Project Syndicate). “Joining the S&P 500 can transform a company’s fortunes, making confidence in the selection process essential for investors and markets alike. But a new study finds that companies purchasing S&P credit ratings were more likely to be admitted, raising questions about the influence of commercial incentives on firms' inclusion.”
“The Music Has Stopped In Private Markets” (CFA Institute). “Many fund managers, journalists, and investment advisors continue debating whether the run on private credit funds…is merely a hiccup in a maturing industry or the beginning of a panic that is likely to accelerate rapidly. My assessment comes out squarely on the latter side…My rationale begins with recognizing the true nature of semi-liquid private market funds. Fund managers portray them as innovative marvels of modern financial and liquidity engineering, but that characterization only holds when they are positioned as solutions to immediate challenges within a compressed time frame. When evaluated against centuries of financial history, they appear neither novel nor durable. Instead, they are simply an ill-advised revival of a structure that has appeared many times before — and often fail. Semi-liquid private market funds suffer many flaws, but the most egregious is that they violate one of finance’s oldest principles: never fund illiquid assets with redeemable claims unless a lender of last resort stands behind the structure.”
“Big Banks Score Win Under New Plan To Loosen Capital Rules” (Wall Street Journal). “America’s biggest banks would be allowed to hold billions of dollars less in capital on their books under proposals unveiled Thursday, easing rules put in place after the 2008 financial crisis that were meant to help shield against meltdowns. The proposals introduced by the Federal Reserve and other regulators would hand a major victory to big banks, which had resisted sharply higher requirements proposed under the Biden administration. Wall Street’s embrace of a second Trump administration had largely centered on the prospect that plans for those stricter requirements would be scrapped.”
What we’re reading (3/16)
“SEC Prepares Proposal To Eliminate Quarterly Reporting Requirement” (Wall Street Journal). “Publicly traded companies in the U.S. have reported results every three months for the past 50-plus years. Trump briefly explored the idea of moving to semiannual earnings reports during his first term, but the effort went nowhere. Those in favor of less-frequent reporting requirements believe a switch could help boost the shrinking number of public companies in the U.S. Among the reasons companies cite as to why they remain private is the time-consuming and costly clerical work required to list and maintain publicly traded shares.”
“Oil Jumps Over 2% As Doubts Linger Over U.S.-Backed Plan To Protect Strait Of Hormuz Shipping” (CNBC). “Oil prices jumped over 2% on Tuesday as uncertainty lingered over a U.S.-led coalition to protect shipping through the Strait of Hormuz. International benchmark Brent crude gained 2.45% to $102.57 per barrel, while the U.S. West Texas Intermediate rose 2.51% to $95.85 per barrel as of 8:44 p.m. ET.”
“America Depends Less On Oil Than Ever” (New York Times). “[T]he U.S. economy is less “energy intensive,” for a few reasons. One, the U.S. economy now depends largely on services like health care, retail and entertainment, which require much less energy than manufacturing industries. There are only about 21 million jobs in goods-producing sectors, while private services employ 114 million people. And two, the machines that Americans do use are now much more efficient, a trend that started in earnest after the oil price shocks of the 1970s.”
“March FOMC Preview: The Fog Of War And The Credibility Of Policy” (BNP Paribas). “We expect the FOMC to acknowledge that risks to inflation have increased on account of the Iran war, and to underscore the importance of maintaining stable long-term inflation expectations. We see a significant, underappreciated tail risk that the FOMC moves toward a ‘symmetric policy bias’,i.e. either a rate hike or a cut is roughly equally likely to follow. However, our base case is that policymakers delay this change for now, as the US labor market does not seem to be overheating and the war’s length, severity and economic impact are uncertain. We still expect the FOMC to remain on hold this year, owing to economic resilience and high, sticky inflation. The oil price rise increases our short-run conviction in this view, but leaves us with greater, bidirectional risk over the medium term.”
“OpenAI To Cut Back On Side Projects To Focus On Core Business, WSJ Reports” (Reuters). “Fidji Simo, chief of applications at OpenAI, previewed the changes to employees in an all-hands meeting, telling them that leaders including CEO Sam Altman and chief research officer Mark Chen were actively looking at which areas to deprioritize, the Journal said, adding that they expect to notify staff about the changes in the coming weeks.”
What we’re reading (3/14)
“JPMorgan Makes Bold Push To Offload Huge LBO Debt” (Bloomberg). “JPMorgan Chase & Co. is gearing up to help issuers sell billions of dollars in junk bonds and leveraged loans, with deals to fund the buyouts of Electronic Arts Inc. and Sealed Air Corp. poised to start next week. More merger and acquisition-driven transactions are in the works, including one for software firm Qualtrics International Inc. Those offerings alone total more than $30 billion in debt.”
“The Billion-Dollar AI Startup That Was Founded by Teenagers” (Wall Street Journal). “Instead of paying humans to join focus groups and complete surveys, Aaru uses thousands of AI agents, or bots, to simulate human responses. It feeds demographic and psychographic information into its models to create human profiles that match clients’ needs, and the results those bots spit out are being used for product development, pricing, identifying new customers and political polling. Aaru has done research work or conducted tests for companies including McDonald’s, Boston Beer and film studio A24, according to people familiar with the matter. It is now helping Bayer, the maker of Aleve and Aspirin, test creative copy and ad slogans for some of its brands, the drugmaker said.”
“Why ATMs Didn’t Kill Bank Teller Jobs, But The iPhone Did” (David Oks). “So what happened to bank tellers? Autor, Bessen, Vance, and the like are right to point out that ATMs did not reduce bank teller employment. But they miss the second half of the story, which is that another technology did. And that technology was the iPhone. The huge decline in bank teller employment that we’ve seen over the last 15-odd years is mainly a story about iPhones and what they made possible. But why? Why did the ATM, literally called the automated teller machine, not automate the teller, while an entirely orthogonal technology—the iPhone—actually did? The answer, I think, is complementarity.”
“Why Vlad Tenev Thinks You’ll Want Robinhood’s ‘James Bond’ Credit Card” (Semafor). “‘That’s the heaviest card ever made,’ says Vlad Tenev as he slides a silvery metallic rectangle weighing 50 grams across a conference-room table. ‘You want to be James Bond?’ Robinhood Markets’ CEO asks. ‘This is the card for you. If Sean Connery was still alive, this is the card that Q would give him to put in his wallet.’ The online brokerage debuted its platinum credit card this month, going up against industry stalwarts like American Express and JPMorgan Chase, as part of Tenev’s drive to broaden its reach beyond the meme stock traders and crypto buyers who have driven its growth.”
“Financier Who Offered ‘Guaranteed’ High Yields Pleads Guilty To Fraud” (Wall Street Journal). “Paul Regan pleaded guilty to three felony charges of securities fraud following a series of Wall Street Journal articlesin 2024 on the international financier and his mysterious high-yield investment offerings. The U.S. attorney’s office in Manhattan alleged that Regan defrauded more than 300 investors of at least $50 million based on ‘materially false and misleading’ claims. In an indictment unsealed last September, prosecutors alleged that Regan and his associates ran two investment firms ‘like a Ponzi scheme, using money obtained from earlier investors to pay later investors and to pay commissions to salespeople.’”
What we’re reading (3/13)
“Fourth-Quarter GDP Revised Down To Just 0.7% Growth; January Core Inflation Was 3.1%” (CNBC). “The first revision of the GDP reading was a sharp step down from the previous estimate of 1.4% and well below the Dow Jones consensus forecast for 1.5%. It also marked a considerable slowdown from the 4.4% gain in the prior period, hampered by a record-long government shutdown that saw government spending tumble 16.7%.”
“Judge Throws Out Subpoenas In Federal Reserve Criminal Probe” (Yahoo! Finance). “A federal judge on Friday threw out two subpoenas the Justice Department issued to the Federal Reserve, all but branding the criminal probe invalid and handing a significant victory to the Fed and its embattled Chair Jerome Powell.”
“The Hottest New Crypto Trade Is 24/7 Oil Futures” (Wall Street Journal). “While traditional energy investors spent the past weekend counting down the minutes until futures markets reopened on Sunday, overseas crypto traders were already placing their bets on the direction of oil prices. The cryptocurrency exchange Hyperliquid lists perpetual futures, a highly speculative flavor of derivatives, tracking West Texas Intermediate crude—the U.S. benchmark—and other commodities. And like other crypto-native contracts, perpetual futures trade 24/7.”
“The Trouble With State Capitalism” (Foreign Affairs). “[T]he more governments today deploy such tactics, the more difficult it will be for their successors to shelve the new playbook. This is not just a change in intensity but also a change in kind.”
“The Labor Market Consequences Of Rapid Sectoral Shifts” (John R. Grigsby and Nathan Zorzi). “Sectoral shifts require costly labor reallocation for workers, fueling concerns about how quickly they occur. We study how the pace of such sectoral shifts affects workers at risk of displacement. We develop a life-cycle model with skill heterogeneity and job ladders where labor demand gradually rises in one sector and declines in another. The model reveals three novel insights. First, workers’ lifetime earnings are strongly non-linear and even nonmonotonic in the horizon over which the transition unfolds. Second, more and more workers benefit on the extensive margin as the transition accelerates, but the tail of losses becomes thicker on the intensive margin. Third, labor market frictions are important to quantify these non-linearities. We apply our model to the climate transition and find substantial earnings losses from a transition ending in 2060. Completing the transition ten years earlier reduces average losses, but raises losses in the tail by a fifth.”
What we’re reading (3/13)
“Why The Real Market Shock Is In Long Bonds” (Yahoo! Finance). “In each of the four times the 30-year neared or broke above 5% in the past three years, stocks took a short-term hit, only to recover as yields quickly sank again, each time for different reasons.”
“U.S. Economic Outlook Cut By Goldman Over The Iran War — And The Fear Goes Beyond Oil” (MarketWatch). “Their rule of thumb is that a sustained 10% increase in oil boosts the inflation rate by 0.2 percentage points, and the core inflation rate by 0.04 points. Similarly, a sustained 10% rise in oil lowers GDP growth by a tenth, though that could be tempered depending on how domestic producers respond. The impact of tighter financial conditions also weighs on the economy. For every 1 percentage point tightening in their financial conditions index, GDP growth is hurt by 1 point over the following year. So far, Goldman’s financial conditions index has tightened by 0.2 percentage points.”
“An Exodus Of Money Endangers Wall Street’s Private-Credit Craze” (Wall Street Journal). “The private-credit engine that powered massive growth on Wall Street is sputtering, with investors trying to pull money out of big funds, forcing firms into uncomfortable decisions and endangering their future profits. The latest example came Wednesday when Cliffwater told clients that investors in its largest fund asked to cash out 14% of their money this quarter. The $33 billion fund will pay out about 50% of the redemption requests, meaning that the other half will need to wait at least another quarter to exit.”
“Do Current Trends In Drone Technology Favor Offense Or Defense?” (Marginal Revolution, from 3/16/24). “Overall, current drones seem to increase the vulnerability of fixed assets such as tanks or troop formations, or for that matter oil refineries or Moscow or Ukraine fixed landmarks. A very large and sophisticated U.S. aircraft carrier might be able to repel the drones (albeit at high dollar cost), but a bunch of tanks in an open field will not have comparable protection. In the abstract, “mid-valued assets become more vulnerable” could favor either offense or defense. The more obvious trend is that it favors nations willing and able to lose lots of mid-sized assets. That is either because a) the nation doesn’t care, because it is evil, or b) because the nation can replace them quickly, for instance by building more tanks or by drafting more soldiers.”
“Winston Churchill To be Scrapped From Banknotes As Bank Of England Panel Labels Decision ‘Overdue’” (GBI). “The Bank of England has confirmed Sir Winston Churchill will be scrapped from banknotes and replaced with images of wildlife. The central bank will soon ask the public which animals they want to appear on the next set of £5, £10, £20, and £50 notes - but confirmed the wartime hero Prime Minister would not be staying. The move to replace historical figures with animals was described as ‘significant’ and ‘overdue’ by celebrity bird-watcher Nadeem Perera, who sits on the bank's panel of wildlife experts who will choose which English species will appear on the next set of banknotes.”
What we’re reading (3/11)
“Bond Yields Jump As Oil Prices Rise, Middle East War Outlook Uncertain” (Wall Street Journal). “Yields on U.S. and European government bonds rose sharply on Wednesday as the U.S.-Israel conflict with Iran showed no signs of de-escalation and oil prices remained elevated.”
“IEA Agrees To Release Record 400 Million Barrels Of Oil To Address Iran War Supply Disruption” (CNBC). “The International Energy Agency on Wednesday agreed to release 400 million barrels of oil to address the supply disruption triggered by the Iran war, the largest such action in the organization’s history.”
“Oil Jumps As Iraq Halts Ports, IEA Release Fails To Quell Rally” (Bloomberg). “Brent crude rallied back toward $100 a barrel as Iraq stopped operations at its oil ports after two tankers were targeted, overshadowing a record release of emergency reserves from wealthy nations.”
“Smart Money, Dumb Money, It’s All Just Money” (Wall Street Journal). “For every bit of evidence showing that individual investors do dumb things, there’s at least one showing that institutions do, too.”
“AI Is A Five Layer Cake” (Jensen Huang). “AI is one of the most powerful forces shaping the world today. It is not a clever app or a single model; it is essential infrastructure, like electricity and the internet. AI runs on real hardware, real energy and real economics. It takes raw materials and converts them into intelligence at scale. Every company will use it. Every country will build it. To understand why AI is unfolding this way, it helps to reason from first principles and look at what has fundamentally changed in computing.”
What we’re reading (3/10)
“IEA Proposes Largest Ever Oil Release From Strategic Reserves” (Wall Street Journal). “The International Energy Agency has proposed the largest release of oil reserves in its history to bring down crude prices that have soared during the U.S.-Israel war with Iran, officials familiar with the matter said. The release would exceed the 182 million barrels of oil that IEA member countries put onto the market in two releases in 2022 when Russia launched its full-scale invasion of Ukraine, the officials said. The proposal was circulated at an emergency meeting of energy officials from the IEA’s 32 member countries on Tuesday. Countries are expected to decide on the proposal Wednesday. It would be adopted if none objects, but even one country’s protests could delay the plan, officials said.”
“Diesel Markets, Upended By Middle East Conflict, Threaten Global Economic Slowdown” (Reuters). “‘Diesel is the most exposed product to this conflict structurally,’ Shohruh Zukhritdinov, founder of Dubai-based Nitrol Trading, said. ‘Diesel underpins freight, agriculture, mining and industrial activity, making it the most macro-sensitive barrel in the system.’”
“Iran Conflict Triggers Losses For Citadel, Millennium And Point72” (Wall Street Journal). “Citadel, Millennium Management and Point72 were among those hit by the market fallout, according to people familiar with the matter, as were Balyasny Asset Management and ExodusPoint Capital Management. Millennium and Point72 each lost $1.5 billion last week, the people said, while Citadel lost about $1 billion in its fixed-income and macro business. While there wasn’t a particular trade that stoked the losses, some funds were hit by macroeconomic bond-market bets that went awry. That includes the popular steepener trade, in which investors bet on a widening gap between short- and long-dated bond yields. Balyasny lost about $1 billion, including $700 million in its fixed-income business alone, the people said. ExodusPoint lost a couple hundred million dollars on bond-market bets.”
“This Is The Moment Adam Smith Has Been Waiting For” (Jason Furman in the New York Times). “Perhaps the most neglected Smithian virtue in our current discourse is optimism. “The Wealth of Nations” cataloged policy failures and abuses, but it also marveled at the living standard of people in the Britain of his day. Even though the richest person at the time would seem impoverished by today’s standards — lacking even indoor plumbing, to say nothing of flat-screen TVs — Smith was still effusive about the ‘liberal reward of labor’ that narrowed the gap between a prince and “an industrious and frugal peasant.”
“Bubbles, Booms And Crashes In The US Stock Market 1792-2024” (William N. Goetzmann, Otto Manninen, and James Tyler). “We examine the historical frequency of stock market booms, crashes, and bubbles in the United States from 1792 to 2024 using aggregate market data and industry-level portfolios. We define a bubble as a large boom followed by a crash that reverses the market’s prior gains. Bubbles are extremely rare. We extend the industry-level analysis of Greenwood, Shleifer, and You (2019) through 2024 and replicate their findings out of sample using Cowles Commission industry data from 1871 to 1938. Booms do not reliably predict crashes, but they do predict higher subsequent volatility, increasing the likelihood of both large gains and large losses.”
What we’re reading (3/9)
“Dow, S&P 500, Nasdaq Futures Fall, Oil Slides After Volatile Day On Wall Street” (Yahoo! Finance). “A swift decline in oil prices on Monday followed comments from Trump suggested that the war with Iran had largely concluded. Speaking to CBS News, Trump said the war was ‘very complete, pretty much,’ adding that opposing forces had effectively lost their naval and air capabilities. Trump also said that he believes the war is ‘very far’ ahead of the four-to-five week military timeline that was initially suggested.”
“G7 Energy Ministers To Meet Tuesday Morning To Discuss Release Of Oil Reserves, Sources Say” (CNBC). “The talks between the G7 have been ‘positive,’ the sources said. Any coordinated action on releasing reserves would occur after the energy ministers’ meeting, they said. The U.S. believes a joint release of 300 million to 400 million barrels, representing 25% to 30% of the 1.2 billion barrels in the reserve, would be appropriate, sources told CNBC.”
“Is The Nightmare Scenario For Global Energy Here?” (Daniel Yergin in the Financial Times). “Iran was once one of the key oil suppliers to the world. No longer. Its exports, constrained by sanctions, amount to less than 2 per cent of global supplies, most of which go to China at discounted prices. A similar change has taken place in Venezuela. Once a star of world oil and one of the founding members of Opec, today it can hardly even be called a petrostate. It produces less oil than the US state of North Dakota and a quarter as much as neighbouring Brazil.”
“Gold Steadies After Trump Signals Iran War May Be Nearing End” (Bloomberg). “Gold steadied, after the US dollar retreated on comments by President Donald Trump that the war in the Middle East could be nearing an end. Bullion was near $5,140 an ounce in early trading, having lost 0.6% in the previous session, after Trump said he believed the conflict with Iran would be resolved ‘very soon.’ A gauge of the dollar fell as much as 0.1%, extending a decline on Monday. Oil tumbled after an exceptionally volatile session.”
“There’s Another Energy Market That May Get Hit Harder Than Oil By Strait Of Hormuz Closure” (CNBC). “[W]hile many states in the Middle East produce oil, gas production is concentrated at one industrial complex in Qatar, making the market much more vulnerable going forward, noted Alex Munton, director of global gas and LNG research at Rapidan Energy. The real risk, Munton said, is how difficult it will be to restart Qatar’s LNG production at Ras Laffan once traffic resumes in the Strait. Given the complexities of cooling gas, which is fundamentally an industrial process, it will take much longer to restart than oil production.”
What we’re reading (3/5)
“Gold Declines As Strong Dollar, Fed Outlook Outweigh War Premium” (Bloomberg). “Gold declined, pressured by strength in the dollar and the prospect of less monetary easing as the war in the Middle East entered a sixth day with no sign of resolution. Bullion fell as much as 1.7% in US trading as inflation worries stemming from higher energy prices lifted the greenback and Treasury yields. High inflation may prompt the Federal Reserve to hold rates steady or even hike them to contain price pressure. Swaps traders are currently pricing in about 35 basis points of rate cuts by year-end, compared with 60 basis points at the end of last week. That’s negative for bullion as it pays no interest.”
“The February Jobs Numbers Are Coming Out Friday. Here’s What To Expect” (CNBC). “The 2025 labor market has been generously described as ‘unstable,’ with virtually no jobs growth and a slew of headwinds expected to conspire against it. In 2026, though, the buzzword seems to be ‘stable,’ even though conditions seem to be largely the same. The picture continues to be of a low-hire, low-fire climate, where companies are both reticent to lay off employees as demand continues to be strong, but also are leery of adding staff amid uncertainty over tariffs, inflation and geopolitics. However, characterizations coming from Federal Reserve officials and market economists have grown at least a bit more optimistic — stressing the stability, if not the robustness, of the labor market. The difference between this year and last? Expectations.”
“Investors Can Still Outwit AI, But Only If They’re Unpredictable” (Joachim Klement). “What emerges from the data is an interesting split. When dealing with common cognitive biases, like the gambler’s fallacy or base-rate neglect, where genAI can fall back on well-established mathematical formulas, the answers are largely free from bias. One can therefore expect that in forecasting situations in which humans may be subject to such biases, genAI will likely outperform investors made of flesh and bone. But when dealing with problems that have a large degree of qualitative uncertainty or where the answer requires a judgment call, genAI is just as biased as most humans. When the model can’t rely on a mathematical answer, it has to deduce a solution from its training data. And the training data is mostly man-made and thus codifies the same biases as humans. It’s a case of garbage-in, garbage-out.”
“Crypto Fans Have an Alternative to Savings Accounts. Banks Are Freaking Out.” (Wall Street Journal). “Stablecoins aren’t yet widely used as savings or checking accounts, and mostly remain a way for the crypto conversant to buy other digital tokens or transfer money. But the coins are starting to catch on among some crypto users as a way to park money and earn yields—a development that banks are determined to stamp out before it gets any bigger. It is enough of a threat that the tokens are now at the center of a fight holding up President Trump’s push to formalize crypto’s role in the financial system.”
“Retail Investors Will Be Ripped Off In Private Markets With SEC Approval” (Better Markets). “Private credit firms have been angling to attract retail investors, because more money coming in is, of course, good for business. But retail investors don’t behave the same way institutional players do, and when the panic begins in private markets, there are no guardrails to protect individuals the way there are in banking.”
What we’re reading (3/4)
“Stocks Recoup Some Losses But Close Lower As Middle East Conflict Stirs Up Volatility” (CNN Business). “Global stocks closed lower Tuesday after a volatile day that saw the Dow briefly tumble by more than 1,200 points as concerns linger among investors that the widening conflict in the Middle East could escalate further. The Dow closed lower by 404 points, or 0.83%, paring earlier losses. The S&P 500 sank 0.94% and the Nasdaq moved 1.02% lower, partially recovering from earlier declines of nearly 2.5% and 2.75%, respectively. Wall Street’s fear gauge, the VIX, was up 10% after briefly rising as much as 31%. The VIX settled at its highest level in just over three months. Stocks in Europe and Asia were also lower for a second day.”
“Morgan Stanley Lays Off 2,500 Employees Across All Divisions” (Wall Street Journal). “Morgan Stanley is laying off around 3% of its workforce or about 2,500 people, according to people familiar with the matter. The cuts are affecting employees in the bank’s three major divisions, the people said, which are investment banking and trading, wealth management and investment management. They are tied to shifting business and location priorities—as well as individual job performance—and are occurring both in the U.S. and abroad, one of the people said.”
“Why Treasurys Are Failing Their Biggest Test In Decades — And What You Should Own Instead” (MarketWatch). “U.S. Treasurys are providing more evidence that they’re no longer safe havens during times of crisis. Treasury bonds used to be places for investors to weather geopolitical upheaval. Whenever investors shifted to ”risk off” from “risk on,” out went stocks and other risky assets in favor of what was perceived as the world’s safest asset: U.S. government bonds. Recently, the opposite has been the case[.]”
“We Are In The Midst Of An Astonishing Productivity Miracle” (RealClear Markets). “Health insurance companies employ over one million employees to process claims. That figure does not include the administrative staff employed by your family doctor or local hospital to also prepare and submit those same claims. The result? Claims are entered incorrectly, fraud proliferates, inefficiencies abound, providers often wait 90 days or more to be paid—if they are paid at all—and patients are frequently left with bills they do not owe. Suppose there was a system that eliminated this mess.”
“Apple Debuts $599 MacBook Neo, Targeting Schools And Small Businesses” (Yahoo! Finance). “‘This is one of the most important announcements for Apple in the Mac product line and represents a shift in the history of the Mac. Apple has always positioned the MacBook as a premium computing product, with entry prices typically starting near or above $999,’ International Data Corporation vice president of client devices Francisco Jeronimo said.”
What we’re reading (3/3)
“In A Day Of Wild Market Moves, Oil Is A New Haven” (Wall Street Journal). “It’s natural to think that with the U.S. and Israel starting a new war in the Middle East, the fall in stock prices would come with a rush for havens. And it would be easy to mistake the big rise in the dollar for investors seeking safety in the normal way. But it would be wrong. Instead, the moves on Tuesday look much more like an oil-price reaction, combined with cutbacks in overextended winning positions. Sure, the dollar index rose about 1% at its best, which is typically part of a search for safety. But currencies usually regarded as even safer in a crisis fell against the greenback: The Swiss franc was down 0.5% at the same time, the yen off 0.3% and gold down 4%.”
“Oil Prices Surge As Analysts Say Iran Conflict ‘May Be Different’ From Previous Flare-Ups” (Yahoo! Finance). “Markets have largely learned to downplay conflict-driven oil shocks, with crude prices often recovering quickly after an initial pop. But analysts say the most recent Iran strikes could be different. Oil prices have surged by roughly 15% since the US and Israel began a major airstrike campaign against Iran on Saturday, killing Supreme Leader Ayatollah Ali Khamenei and provoking a violent and chaotic response from Iran that has engulfed the Middle East.”
“Gold Tumbles Amid Broader Market Sell-Off As Dollar Rises” (Yahoo! Finance). “Bullion touched its lowest level since February, wiping out gains accrued following the US and Israeli strikes on Iran over the weekend. Investors weighed the inflationary effects of higher oil prices and the growing likelihood that the Federal Reserve may cut interest rates less than previously expected.”
“Can A.I. Be Pro-Worker” (The New Yorker). “The three M.I.T. economists don’t underestimate the scale of the challenge. “None of the big companies are pouring even a small fraction of their investment into developing A.I. as a pro-human, pro-worker tool,” Acemoglu said in his interview. To reorient things, he and his colleagues make a series of policy recommendations, including changing the tax laws, fostering competition in the A.I. sector, and giving workers a direct stake in A.I. One key proposal is for the government to use its financial power—both as a provider of research grants, and as a buyer and user of technology systems—to push the development of A.I. in a pro-worker direction.”
“Having Your Own Government Try To Destroy You Is (At Least Temporarily) Good For Business” (Astral Codex Ten). “Anthropic isn’t publicly traded, so we turn to the prediction markets. Ventuals.com has a ‘perpetual future’ on Anthropic stock, a complicated instrument attempting to track the company’s valuation, to be resolved at the IPO…Upon the “supply chain risk” designation, predicted value at IPO fell from about $550 billion to $475 billion - then, after a day or two, went back up to $550 billion. No effect!”
What we’re reading (3/2)
“US Stocks Recover, Gold Rises And Oil Surges As War With Iran Spreads” (CNN Business). “Oil prices surged, US stocks erased earlier losses and gold rose Monday as financial markets digested concerns about a broadening war with Iran. Investors are bracing for volatility in global energy markets as developments unfold in the Middle East. While markets saw sharp moves, the volatility so far has been largely as expected, and Wall Street is on watch for potential further disruptions to oil and gas prices.”
“How High Can Oil And Gas Prices Go Because Of The Iran War? Here Are The Scenarios” (CNBC). “The global oil market is facing a worst-case scenario as the U.S. war with Iran engulfs the Middle East with no clear off-ramp, increasing the risk of a prolonged supply disruption that could slow the global economy. Tanker traffic through the Strait of Hormuz, the world’s most important chokepoint for oil shipments, has come to a standstill as ship owners take precautionary measures. About a third of the world’s total seaborne oil exports passed through the Strait in 2025, according to energy consulting firm Kpler.”
“What It Would Take For Oil To Reach $120 Per Barrel, According To JPMorgan” (MarketWatch). “‘Beyond the initial knee-jerk reaction, the trajectory of oil prices will ultimately depend on four variables: how many barrels are physically disrupted; how long the disruption lasts; in a prolonged disruption, whether credible replacement supply — including potential releases from strategic reserves — can be mobilized quickly enough to avoid a structural tightening of the global oil balance; and what comes next,’ says [JPM strategist Natasha] Kaneva.”
“Airlines Grapple With Disruptions That ‘Far Surpass’ Previous Middle East Conflicts” (Wall Street Journal). “‘The situation far surpasses anything we’ve seen in the Middle East previously,’ said Matt Borie, chief intelligence officer at aviation risk firm Osprey, citing the vast scale of Iran’s retaliation across the region following last weekend’s broad attacks from Israel and the U.S.”
“Goldman Traders See ‘Painful’ Path For US Stocks Before Rebound” (Bloomberg). “US equities may need to pull back further before they can mount a durable advance, Goldman Sachs Group Inc.’s trading desk warned, citing fragile sentiment and choppy flows that left the S&P 500 vulnerable after its latest attempt to clear the 7,000 level fizzled. ‘The only way up is down from here,’ Goldman’s trading desk team including Gail Hafif and Brian Garrett wrote in a note to clients. A broadly supportive macro backdrop has done little to help stocks absorb geopolitical tensions and sharp swings in commodity prices, creating what the bank’s traders called a ‘painful’ near-term path.”
February performance update
Prime: +2.91%
Select: +4.88%
SPY ETF: -0.52%
Bogleheads Portfolio (80% VTI + 20% BND): +0.12%
March picks available now
The new Prime and Select picks for March are available starting now, based on a model run put through today (February 28). As a note, I will be measuring the performance on these picks from the first trading day of the month, Monday, March 2, 2026 (at the mid-spread open price) through the last trading day of the month, Tuesday, March 31, 2026 (at the mid-spread closing price).