What we’re reading (8/1)
“Vast New Study Shows A Key To Reducing Poverty: More Friendships Between Rich And Poor” (New York Times). “Over the last four decades, the financial circumstances into which children have been born have increasingly determined where they have ended up as adults. But an expansive new study, based on billions of social media connections, has uncovered a powerful exception to that pattern that helps explain why certain places offer a path out of poverty. For poor children, living in an area where people have more friendships that cut across class lines significantly increases how much they earn in adulthood, the new research found. The study, published Monday in Nature, analyzed the Facebook friendships of 72 million people, amounting to 84 percent of U.S. adults aged 25 to 44.”
“The Legal Onslaught Facing Credit Card Companies” (DealBook). “This weekend, Judge Cormac J. Carney of the U.S. District Court of central California refused Visa’s request to be dismissed from a case that claims it conspired to help MindGeek, parent company of the website Pornhub, profit from images of child sexual abuse.”
“Facing Labor Shortages, Pella Reinvents The Company Town In Rural Iowa” (Wall Street Journal). “The company and its controlling shareholders—members of the founding Kuyper family and its descendants…have spent tens of millions of dollars in the past three years on housing, child-care centers, restaurants and an indoor entertainment center, among other things, to retain and attract new workers. More spending is on the way.”
“The Evolution Of Malls” (City Journal). “‘People love to be in public with other people.’ For the suburbs, malls offered this experience in the way that parks and town squares had in the past. Like railway stations and hotels before them, malls created a zone of public-private space: private property, yet open to the public to use within certain bounds. They are enjoyed by groups as diverse as white-haired walking groups, teenage truants, and representatives of fringe religions scouting for recruits.”
“A Ransomware Attack Cost This Entrepreneur A Year Of His Life And Almost Wrecked His Business” (Los Angeles Times). “When ransomware bandits struck his business last June, encrypting all his data and operational software and sending him a skull-and-crossbones image and an email address to learn the price he would have to pay to restore it all, Fran Finnegan thought it would take him weeks to restore everything to its pre-hack condition. It took him more than a year.”
What we’re reading (7/31)
“Is Selling Shares In Yourself The Way Of The Future?” (The New Yorker). “[A]fter years of being ideas people to the world’s ideas people, the brothers had come to New York to fund-raise for a big and lucrative idea of their own. In Central Park, they told me that, with Maria and Anna, they’d created an entity called Libermans Co. It held all the income from their enterprises; any debts, assets, and profits they might gain; and any investments they might make or companies they might start for the next thirty years. They had gathered all these elements and sold shares in the whole, offering investors, effectively, a stake in their entire financial future—shares in their life. So far, the Libermans have traded around three per cent of their futures, which investors have valued at four hundred million dollars[.]”
“The Antitrust Showdown To Determine Simon & Schuster’s Fate Is About To Begin” (Vanity Fair). “Jonathan Karp is rallying the troops at S&S as its suitor, Penguin Random House, heads to trial Monday against Biden’s Justice Department. The witness list is a who’s who of publishing bosses, power agents, and authors—including Stephen King—with a $2 billion deal on the line.”
“Oil Prices Will Stay High As Production Constraints Keep Supplies Tight, Top CEOs Say” (Insider). “‘There is more upside than downside when it comes to the oil price,’ Shell Chief Executive Ben van Beurden said in an interview Thursday with Bloomberg TV after his company's quarterly report. ‘Demand hasn't fully recovered yet, and supply is definitely tight.’”
“China Signals It Could Miss Economic Growth Target” (BBC). “On Thursday, the Politburo - the ruling Communist Party's top policy-making body - said it aims to keep growth within ‘a reasonable range’. It did not mention the official growth target of 5.5% it had earlier set. China is continuing to pursue a zero-Covid policy that has put major cities into full or partial lockdowns. In a statement after its quarterly economic meeting, the 25-member Politburo, which is chaired by President Xi Jinping, said leaders would ‘strive to achieve the best results possible’. However, it also called on stronger provinces to work to meet their growth targets.”
“Individual Investors Ramp Up Bets On Tech Stocks” (Wall Street Journal). “[M]any [tech] stocks remain the most popular among individual investors who say they are confident in a rebound and expect the companies to continue powering the economy. In late July, purchases by individual investors of a basket of popular tech stocks hit the highest level since at least 2014, according to data from Vanda Research. The basket includes the FAANG stocks[.]”
August picks available now
The new Prime and Select picks for August are available starting now, based on a model run put through today (July 31). As a note, we’ll be measuring the performance on these picks from the first trading day of the month, Monday, August 1, 2022 (at the mid-spread open price) through the last trading day of the month, Wednesday, August 31, 2022 (at the mid-spread closing price).
What we’re reading (7/30)
“How Goes the War On Inflation?” (Paul Krugman, New York Times). “The real question is whether a moderate slowdown, whether or not it gets called a recession, will be sufficient to control inflation. And the news on that front has been fairly encouraging lately.”
“Inflation Figure That The Fed Follows Closely Hits Highest Level Since January 1982” (CNBC). “An inflation gauge that the Federal Reserve uses as its primary barometer jumped to its highest 12-month gain in more than 40 years in June, the Bureau of Economic Analysis reported Friday. The personal consumption expenditures price index rose 6.8%, the biggest 12-month move since the 6.9% increase in January 1982. The index rose 1% from May, tying its biggest monthly gain since February 1981.”
“$2,245.62 A Second: ExxonMobil Scores Enormous Profit On Record Gas Prices” (CNN Business). “ExxonMobil and Chevron both reported record massive profits thanks to record gasoline prices during the quarter. Exxon's profit, excluding special items, came to $17.6 billion in the second quarter, nearly double what it made in its very profitable first quarter as oil and gas prices started to soar in the wake of Russia's invasion of Ukraine. Second-quarter profit was up 273% from the same period a year ago.”
“OnlyFans Has Laid Off Staffers Amid A Move To ‘Reshape Certain Teams’” (Insider). “‘While this is the right decision for OnlyFans and our Creator community, we recognize it is difficult for the people who were impacted by this decision,’ the statement said. ‘Affected employees have been provided with a generous severance package and career counseling to support their transition period.’”
“JPMorgan’s List Of Reasons For Firing Mouthy Compliance Officers Look An Awful Lot Like Anti-Whistleblower Retaliation” (Dealbreaker). “JPMorgan Chase doesn’t like the suggestion that it would fire a newly-hired compliance officer for, you know, attempting to make the bank compliant. And not only because Shaquala Williams is suing it for just that, but also getting rather detailed about all of the ways it was violating its deal with the Justice Department over hiring all of those Chinese princelings in alleged pursuit of Chinese business. Ways like refusing to do anything about its allegedly shoddy sanctions screening software, shitty record-keeping, continued bribe-paying and lying to regulators.”
What we’re reading (7/28)
“U.S. Yield Curve Flashing More Warning Signs Of Recession Risks Ahead” (Reuters). “The shape of the yield curve, which plots the return on all Treasury securities, is seen as an indicator of the future state of health of the economy, as inversions of the curve have been a reliable sign of looming recession.”
“Gold Scores Biggest One Day Rally Since March, Silver Jumps Nearly 7% Due To Fed-Inspired ‘Short Squeeze’ (MarketWatch). “Gold and silver both benefitted from Federal Reserve Chairman Jerome Powell’s comment on Wednesday that the next interest rate hike in September would depend on the tenor of upcoming U.S. economic data. Traders have interpreted Powell’s vague guidance as opening the door to a rate hike of just 50 basis points in September after the Fed opted for 75 basis point hikes in June and July.”
“U.S. GDP Fell At 0.9% Annual Rate In Second Quarter; Recession Fears Loom Over Economy” (Wall Street Journal). “The U.S. economy shrank for a second quarter in a row—a common definition of recession—as the housing market buckled under rising interest rates and high inflation took steam out of business and consumer spending. Gross domestic product, a broad measure of the goods and services produced across the economy, fell at an inflation and seasonally adjusted annual rate of 0.9% in the second quarter, the Commerce Department said Thursday. That followed a 1.6% pace of contraction in the first three months of 2022.”
“The 100 Wealthiest Americans Lost $622 Billion Since November” (Bloomberg Tax). “In the early days of the pandemic, when markets plunged and 22 million Americans lost their jobs, Congress and the Federal Reserve sprang into action to stabilize an economy at risk of buckling. After trillions of dollars of Covid-19 relief cash and a monsoon of cheap federally sponsored loans, US households are sitting on record savings. But no group benefited more than the one needing the least assistance: the ultrarich.”
“Ex-Boyfriend Of Biglaw Associate Arrested For Insider Trading... Wonder Where He Allegedly Got All That Nonpublic Info?” (Dealbreaker). “Seth Markin, a former FBI trainee, and his friend Brandon Wong were arrested on insider trading charges (there’s also a parallel civil complaint filed by the Securities and Exchange Commission) earlier this week. According to the indictment, the pair made ~$1.4 million by improperly trading on nonpublic information, specifically that Pandion was set to be acquired by pharmaceutical company Merck. How’d they come across this insider information? The indictment indicated Markin was dating a Biglaw associate staffed on the M&A deal, and he ‘abused his relationship of trust and confidence’ to gain access to the information.”
What we’re reading (7/27)
“Nasdaq Soars 4% On Combination Of Mega-Cap Tech Earnings And Fed's 75-Basis-Point Rate Hike Comments” (Insider). “US stocks soared on Wednesday, with the Nasdaq up more than 4% after the Federal Reserve moved forward with another 75-basis-point interest rate hike, putting the effective Fed Funds Rate at a range of 2.25% to 2.50%.”
“Boise’s Housing Market Boomed Early In The Pandemic. Now It Is Cooling Fast.” (Wall Street Journal). “During the pandemic-fueled housing boom, Boise emerged as one of America’s hottest ‘Zoomtowns,’ communities that experienced a spike in population from an influx of remote workers. Now, the housing boom around Idaho’s capital city has ground to a halt…[s]ixty-one percent of listings in the Boise metro area had a price cut in June, the highest rate out of 97 metro areas surveyed, according to brokerage Redfin Corp. Home builders who couldn’t keep up with demand last year are cutting back on construction.”
“Big Tech And The Fed” (DealBook). “The long-booming bottom lines of major tech companies are all of a sudden smaller than expected. That might be a good thing. Big Tech sailed through the pandemic with its profits mostly intact. The fact that some firms’ results are now flagging could be a positive sign for the Federal Reserve, which is trying to engineer a slowdown as it fights the nation’s worst bout of inflation in four decades.”
“Etsy Announces Plans To Close Its San Francisco Office” (Etsy). “Etsy announced it will close its satellite office in downtown San Francisco after a significant number of its staff said they did not plan to go back following a shift to a hybrid work model.”
“The Choco Taco, Ice Cream Snack Of American Summers, Is Discontinued” (New York Times). “The Choco Taco, a nut-and-chocolate-topped ice cream snack that for decades has been a top choice at the ice cream truck or convenience store freezer, is being discontinued, its creator confirmed this week after weeks of rumors about its impending demise.”
August picks available soon
We’ll be publishing our Prime and Select picks for the month of August before Monday, August 1 (the first trading day of the month). As always, we’ll be measuring SPC’s performance for the month of July, as well as SPC’s cumulative performance, assuming the sale of the July picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Fri., July 29). Performance tracking for the month of August will assume the August picks are bought at the open price (at the mid-point of the opening bid and ask prices) on the first trading day of the month (Mon., August 1).
What we’re reading (7/26)
“SEC Tests Its Reach With Coinbase Insider Trading Case” (Law360). “The SEC lodged claims Thursday that the former manager, Ishan Wahi, tipped off his brother and a close friend when Coinbase was about to list certain digital assets on its exchange and that they used the information to make profitable trades. All three men face criminal charges of wire fraud for the alleged scheme, which prosecutors said spanned 25 different assets and pulled in $1.5 million. In its corresponding civil case, the SEC argued that nine of those assets are securities and that the defendants engaged in insider trading of securities.”
“What Smart Investors Do In Bear Markets” (Wall Street Journal). “Many investors believe bear markets end only after formerly overvalued stocks finally become bargains again. It just isn’t so. In March 2009, in the pit of the global financial crisis, stocks traded at more than 13 times their longer-term earnings, adjusted for inflation, according to data from Yale University finance professor Robert Shiller. That was only about 20% cheaper than the average all the way back to 1881. Although stocks didn’t seem like a statistical bargain at the time, they went on to gain roughly 15% annually over the next decade.”
“‘Edge Of A Global Recession’: IMF Slashes World Economic Forecast Again” (CNN Business). “In a report released Tuesday, the International Monetary Fund once again lowered its world economic forecast as it predicted major slowdowns in the three biggest economies: the United States, China and Europe…[t]he IMF now expects the world economy to grow just 3.2% this year, down from 6.1% in 2021.”
“Nearly Half Of All Americans Are Falling Deeper In Debt As Inflation Continues To Boost Costs” (CNBC). “Nearly 40% of consumers cannot put any money at all into savings, according to a recent analysis of household financial health and readiness by the American Consumer Credit Counseling, while about 19% said they had to reduce their savings rate.”
“He’s Baseball’s Only Mud Supplier. It’s A Job He May Soon Lose.” (New York Times). “Major League Baseball — a multi-billion-dollar enterprise applying science and analytics to nearly every aspect of the game — ultimately depends on some geographically specific muck collected by a retiree with a gray ponytail, blurry arm tattoos and a flat-edged shovel.”
What we’re reading (7/25)
“The Fed Will Eventually Choose Propping Up Growth Over Fighting Inflation And Will Start Cutting Rates Next Year, Says BlackRock” (Insider). “In a report Monday, the asset manager said a so-called soft landing, where the central bank raises rates without sinking growth, will be unlikely, as investors brace themselves for another 75-basis-point rate hike on Wednesday.”
“Investors Bet Fed Will Need To Cut Interest Rates Next Year To Bolster The Economy” (Wall Street Journal). “As the Federal Reserve prepares to meet this week, Wall Street investors are betting that officials will raise interest rates aggressively through the end of the year—and then turn around and start cutting them about six months later.”
“Welcome To The Great American Recession Guessing Game” (CNN Business). “The Treasury Secretary says the US economy is not in a recession. One of her Democratic predecessors says a recession is highly likely. The economists at Goldman Sachs put the odds of a recession at 50/50. Welcome to the Great American recession guessing game.”
“Walmart Cuts Profit Outlook As Inflation Forces Shoppers To Spend More On Necessities” (CNBC). “Walmart on Monday cut its quarterly and full-year profit guidance, saying inflation is causing shoppers to spend more on necessities such as food and less on items like clothing and electronics. That shift in spending has left more items on store shelves and warehouses — forcing the big-box retailer to aggressively mark down items that customers don’t want.”
“Around Half Of Older Americans Can’t Afford Essential Expenses: Report” (Changing America). “More than half of older women who live alone are classified as poor under federal poverty standards or have insufficient incomes to pay for essential expenses, while 45 percent of men share the same financial situations. The index takes several factors into account, including cost of health care, food, housing and transportation, and can be adjusted based on seniors’ health status. In 2020, data from the index showed more than 2 million older couples were considered financially insecure based on their yearly incomes, according to figures obtained by Kaiser Health News.”
What we’re reading (7/24)
“Housing Market Chills As Mortgage Rates, Prices Scare Buyers” (Reuters). “Besides pushing would-be homeowners to reconsider their home search, rising rates are also forcing a growing number of buyers who struck a deal on a house to back out. About 60,000 home-purchase deals fell through in June, representing nearly 15% of all homes that went under contract last month, according to Redfin. That’s up from 12.7% in May and 11.2% a year ago.”
“Fed To Inflict More Pain On Economy As It Readies Big Rate Hike” (Bloomberg). “[W]ith inflation proving persistent at a four-decade high, a growing number of analysts say it will take a recession -- and markedly higher joblessness -- to ease price pressures significantly. A Bloomberg survey of economists this month put the probability of a downturn over the next 12 months at 47.5%, up from 30% in June.”
“The Crypto Boom Runs On Hype Men Like ‘BitBoy,’ An Untrained Atlanta YouTuber” (Washington Post). “‘You can’t possibly EVER support Celsius Network or [CEO Alex] Mashinsky in any way,’ Armstrong, who goes by the moniker Bitboy_Crypto, told his nearly 900,000 Twitter followers after Celsius froze all depositors’ money in June. There was only one problem: Armstrong had been central to encouraging them to deposit their money with Celsius in the first place.”
“She’s 17 And Has A Roth IRA. How Gen Z Is Handling Its First Bear Market.” (MarketWatch). “Ella Gupta made her first investment when she was 10. With the help of her parents, she took half the profits of her bracelet-making business and invested in the stock market. At 14, she opened a Roth IRA, after beginning her first job cleaning dental instruments. Now, at 17, Gupta is confronting her first bear market.”
“Recession Warning: Some Americans Are Having Trouble Paying Bills” (CNN Business). “Is America's economy already in a recession? That's a debate among central bankers, investors and economists, not to mention politicians. But one thing is clear: Some consumers, especially less affluent ones, are starting to have trouble paying their bills on time.”
What we’re reading (7/20)
“Tesla Ends Streak Of Record Quarterly Profits After China Factory Shutdown” (Wall Street Journal). “Tesla Inc. reported its first sequential decline in quarterly profit in more than a year as it navigates global economic turmoil and recovers from an extended shutdown at its Shanghai assembly plant.”
“Crypto Has A Whole New Boondoggle To Sell You” (Insider). “Now, after burning through billions of dollars and getting booted from the company he founded, [WeWork cofounder Adam] Neumann is back. And this time he wants to help save the world — or at least that's what he wants us to believe.”
“Why A Middle-Class Lifestyle Remains Out Of Reach For So Many” (New York Times). “But it’s not. In February of 2020, The Atlantic published a piece on the affordability crisis that was souring a seemingly strong economy. ‘In one of the best decades the American economy has ever recorded, families were bled dry by landlords, hospital administrators, university bursars and child-care centers,’ Annie Lowrey wrote. ‘For millions, a roaring economy felt precarious or downright terrible.’ Lowrey’s framing has stuck in my mind over the last couple of years. I don’t think you can understand the broader price crisis without it.”
“‘A Bigger Paycheck? I’d Rather Watch The Sunset!’: Is This The End Of Ambition?” (The Guardian). “This has been called the age of anti-ambition: over the past two and a half years, many people have taken stock – of how they spend their time, where they find meaning, their hopes for the future – and found work wanting.”
“These Are The Keys To 401(k) Investing Success In A Falling Market” (CNN Business). “‘[T]he key to 401(k) success is consistent and ongoing contributions. Continuing to contribute during down markets allows investors to buy assets at cheaper prices, which may help your account recover faster after a market downturn.’”
What we’re reading (7/18)
“One Hedge Fund Is Up 223% This Year Thanks To A Big Bet Against Tech Stocks” (Wall Street Journal). “In late 2020, Mandeep Manku made a big contrarian bet. His hedge fund, Coltrane Asset Management, had already been hit hard when markets plunged because of Covid-19. He decided to swing Coltrane’s portfolio from favoring cheap European companies to betting against tech and other fast-growing companies in the U.S. Markets with so many stocks trading at more than 10 times their revenues, with fervor concentrated in a few sectors, “always end poorly for investors,” Coltrane told clients in a September 2020 presentation.”
“China’s Homebuyers Are Running Out Of Patience With The Real Estate Slump” (CNBC). “China’s real estate market desperately needs a boost in confidence, analysts said, after reports of homebuyers halting mortgage payments rocked bank stocks and raised worries of a systemic crisis. The size of the mortgages isn’t as worrisome as the impact of the latest events on demand and prices for one of the biggest financial assets in China: residential housing.”
“Costco’s Inflation-Proof $4.99 Rotisserie Chicken, Explained” (Vox). “The roasted birds have been hailed as an economic lifeline — most rotisserie chickens will run you $6 to $10 — but the chicken isn’t cheap because of corporate benevolence. In 2015, Costco said it was able to maintain its low price because the company considers the rotisserie chicken a “loss leader.” That means its purpose isn’t to bring in profits, but rather to bring in customers to buy more of the wholesale retailer’s bulk toilet paper and five-packs of deodorant. And it works. The item is so popular among Costco members that it has its own Facebook fan page with 19,000 followers.”
“We Were Wrong About The Great Resignation. Workers Are Still Powerless And The Looming Recession Will Make It Worse.” (Insider). “The Great Resignation — or Great Reshuffle — has been hailed as a reclamation of worker power, including by this publication. But as recession fears throw cold water on the excitement of saying, "I quit," economists told Insider that the truth about the Great Resignation isn't as rosy. Only certain workers have gained any true bargaining power, and even though the lowest-wage workers have seen raises, soaring inflation has largely canceled them out. As the economy and wage growth continues to cool, they'll be the first to see their upper hand slip away.”
“The Latest In Litigation Hotness? Pure Pettiness.” (Dealbreaker). “Madison Square Garden Entertainment is in the midst of some shareholder litigation, in which plaintiffs allege the merger between MSGE and MSG Networks Inc. devalued the stock value to the benefit of MSGE CEO James L. Dolan and his family. But this securities case is the mere background over the real story, which is just how petty some parties can get. You see, Hal Weidenfeld, senior vice president for legal and business affairs at MSGE, sent a letter to the shareholders’ counsel banning them from all MSE venues — including Madison Square Garden, Radio City Music Hall, and the Chicago Theater — until the matter is resolved[.]”
What we’re reading (7/17)
“Many Investors Are Fleeing The Stock Market, But Some Are Doubling Down: ‘If I Lose $15,000, I’m Not Going To Die’” (Wall Street Journal). “In March, individual investors bought $28 billion of U.S.-listed stocks and exchange-traded funds on a net basis—the largest monthly sum ever recorded by Vanda Research since it started tracking data in 2014. Between April and June, that slipped to about $25 billion a month on average, though that is still much higher than prepandemic levels. In April through June of 2019, for example, that number averaged $3 billion a month.”
“Dollar Lurks Below Highs As Euro Gasps For Gas” (Reuters). “Traders are holding their breath ahead of Thursday, when gas is supposed to resume flowing through the Nord Stream pipe from Russia to Germany after a shutdown for scheduled maintenance.”
“From $25 Billion To $167 Million: How A Major Crypto Lender Collapsed And Dragged Many Investors Down With It” (CNBC). “In October 2021, CEO Alex Mashinsky said the crypto lender had $25 billion in assets under management. Even as recently as May — despite crashing cryptocurrency prices — the lender was managing about $11.8 billion in assets, according to its website. The firm had another $8 billion in client loans, making it one of the world’s biggest names in crypto lending. Now, Celsius is down to $167 million “in cash on hand,” which it says will provide “ample liquidity” to support operations during the restructuring process.”
“Fed Officials Preparing To Lift Interest Rates By Another 0.75 Percentage Point” (Wall Street Journal). “Federal Reserve officials have signaled they are likely to raise interest rates by 0.75 percentage point later this month, for the second straight meeting, as part of an aggressive effort to combat high inflation. Policy makers left the door open to a larger, full-percentage-point increase at the July 26-27 gathering. But some of them simultaneously poured cold water on the idea in recent interviews and public comments ahead of their premeeting quiet period, which began Saturday.”
“The Truth, And Strategy, Of Food Expiration Dates” (CNN Business). “You might think that date is the absolute last day that food is safe to eat. You'd be wrong. But you wouldn't be alone in coming to that mistaken conclusion, because the system behind food label dates is an absolute mess. There's no national standard for how those dates should be determined, or how they must be described. Instead, there's a patchwork system — a hodgepodge of state laws, best practices and general guidelines. “It is a complete Wild West,” said Dana Gunders, executive director of ReFed, a nonprofit trying to end food waste.”
What we’re reading (7/16)
“Debt-Market Jitters Come For Leveraged Loans” (Wall Street Journal). “For most of 2022, junk-rated loans made to debt-laden companies gave investors stability amid battered credit markets. Now, recession fears are pushing down loan values and cutting returns in the $1.4 trillion leveraged-loan market.”
“Nothing Short Of Terrifying” (City Journal). “The latest report from the Labor Department is nothing short of terrifying. The worst news concerns those two essentials, food and fuel. Overall, food prices rose 1.0 percent in June and are 10.4 percent above year-ago levels. The prices of food at home stood 12.2 percent above year-ago levels. Energy prices overall rose 7.5 percent in June and stand 41.6 percent above where they were in June 2021—scarcely more than a year ago. Gasoline prices rose 11.2 percent in June alone and stand a whopping 60 percent higher than a year ago.”
“AQR’s Quieter Comeback” (Institutional Investor). “AQR’s managed futures strategies are enjoying a big comeback. Both of the firm’s managed futures funds – the AQR Managed Futures Strategy HV I and the AQR Managed Futures Strategy N – delivered positive returns in June and for the year, according to information Morningstar Direct provided to II. The former earned 49.3 percent in the first half of the year, ranking it first in Morningstar’s Systematic Trend category, which includes 30 funds.”
“How Companies Subtly Trick Users Online With ‘Dark Patterns’” (CNN Business). “An ‘unsubscribe’ option that's a little too hard to find. A tiny box you click, thinking it simply takes you to the next page, but it also grants access to your data. And any number of unexpected charges that appear during checkout that weren't made clearer earlier in the process. Countless popular websites and apps, from retailers and travel services to social media companies, make use of so-called ‘dark patterns,’ or gently coercive design tactics that critics say are used to manipulate peoples' digital behaviors.”
“A Copper Shortage Is Likely Coming For The Energy Transition” (Gizmodo). “By 2035, the global demand for copper is projected to nearly double, according to a new S&P Global report released Wednesday. In the worst-case scenario, based on our current production trends, the report projects a shortfall of 9.9 million metric tons of copper in 2035.”
What we’re reading (7/15)
“China’s Shuddering Economic Engine” (DealBook). “China’s economy grew at its slowest pace last quarter since the coronavirus appeared in Wuhan in 2020, when the country shut down, shrinking the world’s second-largest economy for the first time in nearly 30 years. The economy expanded 0.4 percent in the second quarter from a year earlier, the National Bureau of Statistics reported today, much lower than the 1 percent that economists surveyed by Bloomberg had expected.”
“Citigroup Tops Profit Estimates As Bank Benefits From Rising Interest Rates, Shares Surge 13%” (CNBC). “Shares of the company surged 13% in New York trading, the bank’s biggest post-earnings stock gain in more than two decades, according to Refinitiv data.”
“Stocks End Tumultuous Week With A Rally” (CNN Business). “US stocks surged Friday as an end-of-week rally gained momentum and sent the Dow up over 600 points. A new batch of bank earnings and economic data Friday morning increased investors' optimism about the state of the economy and lessened worries that the Federal Reserve could raise rates by a full percentage point at its meeting later this month.”
“What Is The True Cost Of Inflation? It’s Complicated.” (Wall Street Journal). “Sticker shock is widespread. But not everything is going up, and there are still bargains to be had. Smartphones and TVs, for example, are much cheaper than they were a year ago, and the price of gas has cooled in recent weeks. Some predict other prices will drop as the Federal Reserve raises interest rates and inventories tick higher.”
“The Housing Shortage Isn’t Just A Coastal Crisis Anymore” (New York Times). “San Francisco, Los Angeles, New York and Washington have long failed to build enough housing to keep up with everyone trying to live there. And for nearly as long, other parts of the country have mostly been able to shrug off the housing shortage as a condition particular to big coastal cities. But in the years leading up to the pandemic, that condition advanced around the country: Springfield, Mo., stopped having enough housing. And the same with Appleton, Wis., and Naples, Fla.”
What we’re reading (7/14)
“Stripe Cuts Internal Valuation By 28%” (Wall Street Journal). “Payments giant Stripe last valued by private investors at $95 billion, cut the internal value of its shares by 28%, people familiar with the matter said. Stripe told employees in an email Friday that the internal share price was about $29, compared with $40 in the most previous internal valuation, known as a 409A valuation, the people said. The move lowered the implied valuation of those shares to $74 billion, according to one of the people, which is calculated separately from the stock owned by” major shareholders.”
“The Inflation Numbers Are Bad — But How Bad Are They?” (Vox). “Although many economists say inflation will stay at high levels at least through the end of the year, there are some signs that prices could be moderating. Gas prices are already starting to fall from their recent peak of $5 a gallon and are now averaging about $4.63, which could be reflected in future CPI data, and the cost of home goods and apparel could come down as more retailers like Target slash prices on excess inventory. But economists say it’s difficult to tell whether inflation peaked in June, given the volatility of energy prices.”
“What The Bored Ape Yacht Club And Quontic’s Pool Party In The Metaverse Means For Your Company” (Forbes). “Investments in the metaverse surged to $12 billion in 2021 from $5.9 billion in 2020 to more than$5.9 billion in 2020 to more than. The metaverse could grow to $13 trillion – more than half the size of the entire U.S. 2022 economy – by 2030, according to Citi Bank estimates.”
“Average Rent In Manhattan Was A Record $5,000 Last Month” (CNBC). “The average apartment rent in June was $5,058, the highest on record, according to a report from Miller Samuel and Douglas Elliman. Average rental prices were up 29% over last year, while median rent was up by 25% to $4,050 a month.”
“Elon Musk Is a ‘Nightmare Client’” (The Atlantic). “Twitter’s lawsuit is an extraordinary and odd document. It paints Musk as a dishonest and unserious hypocrite, the sort of person you would never want running your company. But because this same dishonest and unserious hypocrite has signed a document offering to pay a huge premium to shareholders, Twitter’s board is bound by its fiduciary duty to enforce a merger neither Musk nor Twitter’s employees seem to want. It’s an awfully strange twist to the marriage-plot genre: I hate your guts, now marry me! This is shareholder capitalism as romantic comedy.”
What we’re reading (7/13)
“Inflation Rose 9.1% In June, Even More Than Expected, As Consumer Pressures Intensify” (CNBC). “The consumer price index, a broad measure of everyday goods and services related to the cost of living, soared 9.1% from a year ago, above the 8.8% Dow Jones estimate. That marked the fastest pace for inflation going back to November 1981.”
“Bonds Slump As Inflation Surge Fuels Bets On 100-Basis-Point Fed Rate Hike” (Bloomberg). “US Treasury yields jumped after another hotter-than-expected inflation report kindled bets that the Federal Reserve could raise rates by as much as a full percentage point this month. The increase was led by shorter-dated securities sensitive to policy changes, with yields on two-year notes climbing as much as 16 basis points to 3.21% before paring the jump. That pushed the yield above those on 10-year notes by the most since 2006, signaling increasing risk that higher rates will stall economic growth.”
“U.S. Inflation Hits New Four-Decade High Of 9.1%” (Wall Street Journal). “The consumer-price index’s advance for the 12 months ended in June was the fastest pace since November 1981, the Labor Department said on Wednesday. A big jump in gasoline prices—up 11.2% from the previous month and nearly 60% from a year earlier—drove much of the increase, while shelter and food prices were also major contributors.”
“Texas’ Power-Grid Operator Is Asking Crypto Miners To Power Down As The State’s Electricity System Grapples With Sky-High Temperatures” (Insider). “Bloomberg reported that virtually all of the state's large-scale bitcoin-mining operations had screeched to a halt as of Monday, which gave 1,000 megawatts of electricity back to ERCOT. That amounts to about 1% of what Texas' grid can distribute.”
“Oil Falls To Three-Month Low As Recession Fears Spook Market” (Bloomberg). “West Texas Intermediate shed more than 8% to settle under $96 a barrel for the first time since early April. Rising virus cases in China and looming US inflation data are stoking concerns about demand. Meanwhile, dwindling liquidity is also exacerbating price moves. Money managers have become more bearish on the main oil benchmarks, cutting their net-long positions last week to the lowest since 2020.”
What we’re reading (7/12)
“Euro Buyers Fend Off Dollar Parity In Last-Gasp Defense” (Bloomberg). “Traders mounted a last-ditch push on Tuesday to stop those options contracts from triggering after the shared currency slid to within a whisker of a pure one-for-one rate. It’s a border that could quickly collapse if fresh concern over Russian natural-gas supplies or signs of a relatively more hawkish Federal Reserve drive the euro lower.”
“Founders Of Bankrupt Crypto Hedge Fund 3AC Go Missing, As Investors Try To Recoup Assets” (CNBC). “Lawyers representing the creditors say the physical whereabouts of Zhu Su and Kyle Davies, who started Three Arrows in 2012, are “currently unknown”…[t]he documents, filed Friday evening, also allege that the founders have not yet begun to cooperate with the liquidation process ‘in any meaningful manner.’ On Monday, lawyers requested the court keep the identity of the creditors anonymous.”
“Amid All The Uncertainty, Can You Blame Millennials For Embracing ‘Meme’ Stocks?” (Real Clear Markets). “Millennials are the first generation to have less wealth than the previous generation, a fact that does not bode well for an economic model dependent on consumption growth. Contrary to previous generations, they cannot just save and invest as wage growth has not kept up with inflation.”
“Are Cryptocurrencies On Their Last Legs? Hedge Fund Managers Certainly Don’t Think So.” (Institutional Investor). “Thirty-two percent of hedge fund managers think that digital assets will offer the largest alpha-generating opportunity over the next three years, topping equities (18 percent) and fixed income (15 percent), according to the latest report from SigTech, a quantitative technologies provider. Twenty-three percent of hedge fund managers plan to dramatically increase their allocations to digital assets, while 60 percent plan to increase slightly.”
“Advanced E.V. Batteries Move From Labs To Mass Production” (New York Times). “For years, scientists in laboratories from Silicon Valley to Boston have been searching for an elusive potion of chemicals, minerals and metals that would allow electric vehicles to recharge in minutes and travel hundreds of miles between charges, all for a much lower cost than batteries available now. Now a few of those scientists and the companies they founded are approaching a milestone.”
What we’re reading (7/11)
“U.S. Stocks End Lower Ahead Of Inflation Data, Earnings Season” (Wall Street Journal). “All three major indexes opened lower, regained some ground and then lost steam into the close. The S&P 500 fell 44.95 points, or 1.2%, to 3854.43. The blue-chip Dow Jones Industrial Average lost 164.31 points, or 0.5%, to finish at 31173.84. The Nasdaq Composite Index shed 262.71, or 2.3%, to 11372.60 as technology stocks lost ground.”
“US Job Market Provides Hopeful Signs Against Recession And Inflation, But Other Data Are Worrisome” (Jason Furman and Wilson Powell, The Peterson Institute). “The employment report strongly suggests that the economy was not in recession in the first half of 2022. At the same time, however, it provides only limited reassurance about the future because previous recessions were not always evident in the employment data several months prior to the peak.”
“Is South Florida's Housing Market Too Hot?” (Reason). “Already in 2019, some were sounding the alarm about Miami's rising housing prices. One study commissioned by the housing group Miami Houses for All in collaboration with city and county officials found that Miami was the third-most expensive metropolitan area in the entire country for housing costs. The same study found that over 50 percent of households in Miami were spending more than they could afford on rents and mortgage payments.”
“Homebuyers Are Canceling Deals At The Highest Rate Since The Start Of The Pandemic” (CNBC). “The share of sale agreements on existing homes canceled in June was just under 15% of all homes that went under contract, according to a new report from Redfin. That is the highest share since early 2020, when homebuying paused immediately, albeit briefly. Cancelations were at about 11% one year ago.”
“Is The Stock Market Slump A Buying Opportunity?” (Dealbreaker). “Savvy investors know that time after time, again and again, a bad stock market inevitably turns itself around and surges back into the black. When that will happen is anyone’s guess. It could be coming faster than you might think though, especially if the Fed successfully engineers that soft landing they’ve been shooting for. When the stock market recovery does come, you definitely don’t want to be left behind. So, stick in there, stay with it, and try not to give in to all the economic gloom.”
What we’re reading (7/10)
“Twitter Didn’t Seek A Sale. Now Elon Musk Doesn’t Want To Buy. Cue Strange Legal Drama.” (Wall Street Journal). “Elon Musk’s showdown with Twitter Inc. has set the stage for what could become one of the most unusual courtroom battles in corporate-takeover history—a spurned acquisition target that never sought to be bought potentially trying to force the buyer who soured on the deal to see it through.”
“What’s Next In The Elon Musk-Twitter Saga? A Court Battle” (New York Times). “Now that Elon Musk has signaled his intent to walk away from his $44 billion offer to buy Twitter, the fate of the influential social media network will be determined by what may be an epic court battle, involving months of expensive litigation and high-stakes negotiations by elite lawyers on both sides.”
“Uber Broke Laws, Duped Police And Secretly Lobbied Governments, Leak Reveals” (The Guardian). “The unprecedented leak to the Guardian of more than 124,000 documents – known as the Uber files – lays bare the ethically questionable practices that fuelled the company’s transformation into one of Silicon Valley’s most famous exports.”
“How Many F-Bombs Trigger An R Rating? An Obscure Movie Industry Panel Decides” (CNBC). “How many F-bombs can a movie have before it’s rated R? That’s up to Kelly McMahon and a secretive panel of raters that is charged with dishing out the movie industry’s five all-important designations — G, PG, PG-13, R and the extremely rare NC-17. Though it toils in relative obscurity, the panel’s ratings for about 700 movies each year can help determine whether films are suitable for children and have a big impact on a movie’s box office performance.”
“The S&P 500 Will Eke Out A Small Gain This Year As The Index Recovers First Half Losses On The Back Of A Solid Economy, Oppenheimer Says” (Insider). “Oppenheimer this week slashed its outlook for the S&P 500, stating that the benchmark index will do worse than the firm had expected but will still jump 25% through the rest of the year to end 2022 with a small gain.”