What we’re reading (7/5)
“Meme Stocks And YOLO Bets Are Back And Fueling the Market’s Rally” (Wall Street Journal). “Forget the Magnificent Seven. Investors are now learning to love the Unprofitable 858. Meme stocks and money-losing companies are now back in favor, and underpinning a rally that has lifted the market to records. Of the 14 companies in the Russell 3000 index that have more than tripled since April 8, when the market bottomed out, 10 don’t generate any profits, according to analysts at Bespoke Investment Group. And through late June, the 858 Russell 3000 stocks with no earnings have since posted average gains of 36%, outperforming their profitable peers.”
“US Fiscal Folly Could Create Big, Beautiful Debt Spiral” (Joachim Klement). “The U.S. tax and spending bill passed on July 3 is expected to add more than $3 trillion to the country’s deficit over the next decade. If the current debt trajectory continues unabated, it could set off a slow motion debt spiral that could endanger the Federal Reserve’s independence. The sobering long-term debt projections of the Congressional Budget Office may actually understate the likely impact on U.S. debt-to-GDP levels of President Donald Trump’s ‘One Big Beautiful Bill.’”
“Homeowners Who Gambled On Lower Rates Are Paying The Price” (Wall Street Journal). “Millions of Americans bought homes in recent years with mortgage rates at 6.5% or higher, often betting they could refinance to a lower rate within a year or two. Now, with little hope of a rate cut in July after a solid jobs report on Thursday, many of these owners face the predicament of paying those higher costs for longer than they expected.”
“The ‘We’re Still Dancing’ Quote Of Our Time” (Financial Times). “Look, yes, the systemic dangers posed by popular bogeymen like private credit are possibly overstated (for now at least). Banks are historically the main locus of systemic financial risk, given the multitude of vital functions they fulfil. Investment managers really are built differently, and applying the same bank-centric “too big to fail” regulatory framework to them always seemed a bit weird. However, arguing that ‘non-bank financial institutions don’t pose systemic risk to our markets’ is plainly ludicrous.”
“OPEC+ To Boost Oil Production By 548,000 Barrels Per Day In August” (Associated Press). “Eight members of the OPEC+ alliance of oil exporting countries say they will boost production by 548,000 barrels per day in August in a move that could further reduce gas prices this year. The group that includes Saudi Arabia and Russia made the decision at a virtual meeting Saturday. They cited a ‘steady global economic outlook’ and low oil inventories.”
