What we’re reading (10/8)
“A Divided Fed Sees More Rate Cuts Ahead This Year: FOMC Minutes” (Yahoo! Finance). “There was some division at the Federal Reserve's last meeting about whether to cut interest rates and by how much, though most agreed the central bank could cut rates further in 2025. ‘Most judged that it likely would be appropriate to ease policy further over the remainder of this year,’ according to the minutes from the Federal Market Open Committee's Sept. 16-17 meeting, which were released Wednesday.”
“Trump Excludes Generics From Big Pharma Tariff Plan” (Wall Street Journal). “The Trump administration said it isn’t planning to impose tariffs on generic drugs from foreign countries, after months of wrangling over whether to impose levies on the vast majority of drugs that are dispensed in the U.S. The administration has been weighing duties on a range of pharmaceutical products and ingredients, using a tariff investigation under Section 232 of the Trade Expansion Act of 1962, which covers threats to national security. President Trump last month posted online that he would impose 100% tariffs on name-brand drugs on Oct. 1, but didn’t mention generics. Trump ultimately delayed imposing tariffs, as officials said they would allow for more negotiations with drug companies.”
“Is There An AI Bubble? Financial Institutions Sound A Warning” (Associated Press). “Lingering doubts about the economic promise of artificial intelligence technology are starting to get the attention of financial institutions that raised warning flags this week about an AI investment bubble. ‘The risk of a sharp market correction has increased,’ the U.K. central bank said. Officials at the Bank of England on Wednesday flagged the growing risk that tech stock prices pumped up by the AI boom could burst.”
“Share Repurchases And Investment Policies” (Paul Brockman, et al.). “Our study examines the claim that share repurchases lead to reductions in real investments. Repurchase opponents argue that managers forego valuable investments to conduct opportunistic repurchases, while proponents argue that repurchases return excess cash to shareholders. We compare repurchasing firms’ real investments in capital expenditures, R&D, and employment to public and private non-repurchasing firms—holding constant their growth (i.e., investment) opportunity sets. Our results provide no support for the claim that repurchases lead to lower real investments. Consistent with these findings, we also show that financial analysts do not revise downward their capital expenditure forecasts following repurchases.”
“A New Wall Street Trade Is Powering Gold And Hitting Currencies” (Wall Street Journal). “The gold rally of 2025 is unusual in that it hasn’t been fueled by a financial meltdown. A 52% gain in futures this year is on track to outpace similar surges during the first year of the Covid-19 pandemic and the 2007-09 recession, trailing only the inflationary shock in 1979…As investors make increasingly speculative bets that the boom will continue, they are also looking for ways to shield themselves from potential fallout of U.S. policy dysfunction, including widening budget deficits and the current government shutdown. That is pushing them into assets not denominated in dollars.”
