What we’re reading (8/13)
“The Bond Market Can “Fight The Fed” (And Sometimes Win)” (Cato Institute). “A favorite Wall Street Journal columnist, James Mackintosh, quotes an economist saying that because the price‐earnings ratio for stocks rises when bond yields fall, ‘The most capitalist valuation metric in the world, the P/E of the S&P 500, is now just completely dominated by monetary policy.’ That would make sense if increases in the Fed’s policy rates were matched by increases in 10‐year bond yields. On the contrary, bond yields have instead fallen from 3.49% on June 14 when the fed funds rate was 0.33 to 2.78% on August 10 when the funds rate has risen to 2.32%.”
“Affirm CEO Says Next Recession Will Silence Fintech Lender’s Doubters” (Wall Street Journal). “Affirm’s stock is down 77% since hitting its peak in November, compared with a 9% decline in the S&P 500 during the same period. Investors are worried about future costs of borrowing, growing competition and whether Affirm’s borrowers will fall behind on payments during a downturn. The company’s total valuation stands at about $11 billion, down from a peak of $47 billion. Mr. Levchin is confident that Affirm has safely cracked the code to underwriting more consumers than banks would. Like many lenders, Affirm tightened underwriting standards early in the pandemic. Last year, it began loosening them.”
“Sinema Took Wall Street Money While Killing Tax On Investors” (Associated Press). “Sen. Kyrsten Sinema, the Arizona Democrat who single-handedly thwarted her party’s longtime goal of raising taxes on wealthy investors, received nearly $1 million over the past year from private equity professionals, hedge fund managers and venture capitalists whose taxes would have increased under the plan.”
“How To Build A Recession-Proof Portfolio” (Morningstar). “On the equity side…[s]ome of the areas that have held up best in 2022--so commodities, energy investments--could actually underperform in a period of slack economic growth, which I think is an argument for not loading the boat with them even though their performance has been really great, and they've probably held your portfolio aloft to the extent that you've had them in your portfolio. You want to be careful about overdoing them because of their sensitivity to the economic environment.”
“Signs Of BP's Deepwater Horizon Oil Spill Persist Over A Decade Later” (Gizmodo). “At its peak, the damaged underwater oil well was dumping more than 60,000 barrels of crude oil into the ocean daily, according to U.S. estimates. In total, the spill poured about 210 million gallons of crude oil into the Gulf of Mexico. Marine and coastal life suffered terribly, and tens of thousands of sea turtles, millions of fish, thousands of whales and dolphins, hundreds of thousands of birds, and untold numbers of other organisms died in the aftermath.”
