What we’re reading (7/25)
“The Hottest Business Strategy This Summer Is Buying Crypto” (Wall Street Journal). “Companies are raising tens of billions of dollars, not to invest in their businesses or hire employees, but to purchase bitcoin and more obscure cryptocurrencies. A Japanese hotel operator, a French semiconductor manufacturer, a Florida toy maker, a nail-salon chain, an electric-bike maker—they’re all plowing cash into tokens, helping to send all kinds of digital currencies to record levels. News that a new company plans to buy crypto is enough to send its shares flying—spurring others to consider joining the frenzy. Since June 1, 98 companies have announced plans to raise over $43 billion to buy bitcoin and other cryptocurrencies, according to Architect Partners[.]”
“The Stock Market’s Most Unserious Season Is Back And Dorkier Than Before” (New York Times). “The fever in financial markets over ‘meme stocks’ is back and stranger than ever. Just how strange? So strange that on Monday, for no singular reason, shares in a medley of beaten-down companies suddenly soared as small-time investors bought up stocks that mainstream Wall Street analysts and investors had long given up on. It got odder on Tuesday, as that tsunami of trading intensified and the shares of four companies briefly doubled in value. Krispy Kreme (DNUT), Opendoor (OPEN), Rocket Mortgage (RKT) and Kohl’s (KSS) had become the meme stocks of the moment, along with a new moniker from traders — ‘DORK,’ a reference to the first letters of their tickers.”
“Wall Street ‘Euphoria’ Sparks Bubble Warnings” (Financial Times). “Wall Street’s relentless rally this summer has driven stock valuations close to record levels, prompting warnings that “euphoric” markets are entering bubble territory. The S&P 500 index has hit a string of all-time peaks this month, while US corporate borrowing costs are nearing their lowest level in decades, in a dramatic turnaround from the April slump sparked by Donald Trump’s trade war.”
“What Happens After The Dollar’s Hegemony Ends?” (ProMarket). “If the United States does run into problems making the fiscal adjustments needed to fund its debt, it will create a major and recurrent problem for the world that could unfold in higher interest rates, greater inflation, financial instability, or more intense financial repression — or more likely than not, all four. It would not be good for the dollar’s brand[.]”
“Partisan Bias In Professional Macroeconomic Forecasts” (Benjamin Kay, et al.). “Using a novel dataset linking professional forecasters in the Wall Street Journal Economic Forecasting Survey to their political affiliations, we document a partisan bias in GDP growth forecasts. Republican-affiliated forecasters project 0.3-0.4 percentage points higher growth when Republicans hold the presidency, relative to Democratic-affiliated forecasters. Forecast accuracy shows a similar partisan pattern: Republican-affiliated forecasters are less accurate under Republican presidents, indicating that partisan optimism impairs predictive performance. This bias appears uniquely in GDP forecasts and does not extend to inflation, unemployment, or interest rates.”
