What we’re reading (8/23)
“Home Sales Surged 24.7% In July, With Prices Hitting An All-Time High” (CNN Business). For the second time in a row, home prices grew a double-digit percent on a month-over-month basis. Why? The article itself is all about Millennials and remote workers relocating to the burbs, but that doesn’t seem like it would explain the magnitude of the price increase, particularly in a wage-depressed, recession-like environment. The more likely culprit: historically low mortgage rates that have fallen sharply recently. There’s a lesson here for stocks: asset prices in general tend to be extremely sensitive to baseline interest rates (recall that it’s not just home prices that are up, stocks are way up too).
“Apple Fires Back In Court, Says Epic Games CEO Asked For Special Treatment” (CNBC). This mammoth legal battle between Apple and Fortnite-maker Epic Games just gets juicier. “In its filing, Apple alleges that Epic Games asked for an individual arrangement with Apple, producing three emails from Epic CEO Tim Sweeney that bolster its claim.” From an economic perspective, most interesting is that Epic requested the ability to create its own third-party app store for iOS. Apple can claim it charges everybody the same 30 percent all it wants, but if it disallows a third-party app store, it really has no economic basis to claim that 30 percent is a market price (i.e., a competitive, non-monopolist price) in my opinion.
“ETF Boom Fuels Gold’s Sharp Rise” (Wall Street Journal). “[W]ith the rush into gold has come an increase in volatility that many traders don’t welcome. Both metals have dropped about 6% or more from peaks hit this month and are recording bigger daily swings than normal, suggesting that gold and silver have joined U.S. tech stocks among the most crowded trades in markets—creating the risk that months of outperformance could vanish in a day or two of frenzied selling should market or economic conditions turn.”
“TikTok Plans To File Suit Against Trump’s Order on Monday” (Bloomberg). On August 6, President Trump ordered TikTok—the wildly popular Chinese-owned video app—banned in the U.S. with 45 days, and subsequently gave it a 90-day deadline to divest U.S. operations. TikTok plans to challenge the order in court, noting that “[w]hat we encountered instead was a lack of due process as the Administration paid no attention to facts and tried to insert itself into negotiations between private businesses.”
“Well, I Guess Anyone Can Run A SPAC” (Dealbreaker). Former Speaker of the House Paul Ryan is forming a special purpose acquisition company (“SPAC,” also known as a “blank-check company”) and is seeking to raise $300 million in an upcoming IPO.
