What we’re reading (10/12)
“The Big Crash: Are We Really Heading For Another 1929?” (The Telegraph). “The economy is becoming almost wholly dependent on just a handful of tech titan “hyperscalers” chasing a dream of uncertain substance and return. Rarely, if ever, have the fortunes of the world economy depended so precariously on the judgment of such a small cluster of men – the bosses of Meta, Alphabet, Microsoft, Apple, X, Amazon and others chasing the supposed crock of gold at the end of the AI rainbow.”
“The Dangers Of Passive Investing” (Torsten Sløk). “US workers contribute on average around $8,500 to their 401(k) accounts every year, and with 71% of 401(k) assets allocated to equities—and the Magnificent Seven having a weight of almost 40% in the S&P 500—the bottom line is that each worker in the US puts an estimated $2,300 into the Magnificent Seven stocks every year, see chart below. This is passive money going into the Magnificent Seven regardless of whether their outlook is good or bad.”
“The US Really Is Two Economies In One” (Joachim Klement). “[W]hat will show up in the official GDP and retail sales statistics is the change in consumption weighted by how much different income groups spend. And while the unweighted average is a drop in expenditure of 1.4%, the weighted expenditure drop is just a third as large at 0.5%. So, the US statistics will look just fine, but the people will not feel fine at all.”
“Is Private Credit Drowning In Capital? These Are The Strategic Implications For Investors” (Morningstar). “Crowdedness denotes a scenario in which investors collectively and simultaneously acquire significant volumes of the same assets. Those cash flows can drive equity valuations higher. In credit markets, cash inflows not only can drive spreads lower, but they can also lead to increased systemic risk as loan/value ratios can rise and interest coverage ratios fall.”
“California’s Wine Industry Is In Crisis” (Wall Street Journal). “The U.S. wine industry hasn’t had it this bad since Prohibition. The list of problems is long in California, the cradle of American wine. Vineyards have an oversupply of grapes. People are drinking less, especially younger drinkers, and tariffs have caused the biggest foreign market for U.S. wine—Canada—to dry up overnight. With this year’s grape harvest in full swing, way too much wine from previous years still hasn’t been sold.”
