What we’re reading (2/20)
“World’s Largest Food Company Warns Prices Will Continue To Rise” (Axios). “Nestlé, the world’s largest food company, said earlier this week that it is predicting that the prices of staple items will continue to rise this year…Nestlé itself increased prices by 8.2% in 2022, but that still wasn't enough to offset costs, [CEO Mark] Schneider said.”
“AI Is Starting To Pick Who Gets Laid Off” (Washington Post). “A January survey of 300 human resources leaders at U.S. companies revealed that 98 percent of them say software and algorithms will help them make layoff decisions this year. And as companies lay off large swaths of people — with cuts creeping into the five digits — it’s hard for humans to execute alone.”
“Inside Peloton’s Rapid Rise And Bitter Fall — And Its Attempt At A Comeback” (CNBC). “Since reaching a peak intraday share price of $167 in December 2020, Peloton’s stock has crumbled to $13.60 a share. That’s about half of its opening share price of $27, after the IPO was priced at $29. Its market cap, which once surged to more than $45 billion, has shrunk to about $4.7 billion. Shares are up about 71% so far this year, however.”
“Venture Fundraising Hits Nine-Year Low” (Wall Street Journal). “For much of the past decade, investors including pension funds, university endowments and family offices raced to pour cash into venture funds, buoyed by the belief that the industry could outpace the returns of other asset classes over time. In that frothy environment, startup investors accelerated the pace of their fundraising and raised multibillion-dollar funds that began to rival the size of some Wall Street investment firms.”
“Apple Wants To Move Its Manufacturing Out Of China” (Quartz). “Apple supplier Foxconn announced the creation of a major new factory in Vietnam and a $300 million investment to expand its current operations in the country. The decision comes as Apple attempts to move parts of its manufacturing process out of China. The new factory will sit on 111 acres just outside of Saigon, with Foxconn signing a 35-year lease worth approximately $62.5 million, according to a the South China Morning Post. The new factory will possibly make Macbooks, a first for the country that already produces AirPods, Apple Watches, and iPads.”
What we’re reading (2/19)
“It’s Hard To Play The Market With Bed Bath & Beyond. These Meme Stock Investors Are Trying.” (Wall Street Journal). “Enthusiastic buyers sent the stock higher in January and early February, with the price at times more than doubling for the year even as the company seemed to careen toward bankruptcy. The gains then rapidly unwound after Bed Bath & Beyond Inc. landed a new financing deal, which should keep the company afloat, at least for now, but will also dilute existing shareholders. The stock has fallen for all but one of the nine trading sessions since the retailer’s deal with hedge fund Hudson Bay Capital Management was reported. “
“The Government Crackdown On Crypto Is Well Underway. Get Out While You Can” (Los Angeles Times). “The sun may be setting on the cryptocurrency craze. If you’re an investor or even just a curiosity-seeker on the fringes of this financial segment, you might want to prepare for its demise.”
“Sam Altman Is Tech’s Next Household Name — If We Survive The Killer Robots” (CNBC). “To anyone outside San Francisco, Altman would probably seem like just another young tech CEO. He’s a Stanford University dropout who sold a tech startup years ago for a fortune, and he’s spent the past decade investing and coaching other entrepreneurs. He posts confident and sunny life advice on Twitter and peppers his conversation with references to line graphs.”
“DEI Jobs Under Fire” (Marginal Revolution). “As sweeping layoffs plague Big Tech, DEI jobs are taking the brunt of the blow. According to a Bloomberg report, listings for DEI roles were down 19% last year — a larger downtick than in legal or general human resources departments per data from Textio, a company helping businesses create unbiased job ads.”
“Here Are The US Cities Where Home Prices Are Actually Falling” (CNN Business). “Home prices are going up across the country — in aggregate. Looking at individual markets, however, some are showing prices have fallen from a year ago. Single-family median home prices increased 4% in the fourth quarter from a year ago to $378,700. Prices were strongest in the Northeast in the last quarter, up 5.3%; followed by the South, up 4.9%; the Midwest, up 4% and the West, up 2.6%, according to the National Association of Realtors.”
What we’re reading (2/18)
“Amazon To Require Office Workers To Show Up In Person At Least Three Days A Week” (CNN Business). “The move, which takes effect May 1, marks an end to the remote- or hybrid-friendly policy that had been in place at Amazon (AMZN) previously. It also comes a month after Amazon (AMZN) confirmed plans to lay off more than 18,000 workers amid broader uncertainty in the economy.”
“Ousted Tesla Cofounder Martin Eberhard Sounds Off On Elon Musk, How The Company Has Changed, And The EV Wars” (Insider). “Eberhard said that there are a million things he would've done differently at Tesla knowing what he knows now but that they're mostly small regrets. For example, he said Tesla spent too much time debating whether to sell its cars through dealerships or directly to customers. He also said that while he would have made technical changes to the Roadster, overall he's proud of what the team created.”
“Guy Who Thinks WallStreetBets Has Gotten Stupid Still Wants To Own It” (Dealbreaker). “We here at Dealbreaker haven’t seen “The New Americans: Gaming a Revolution,” the meme-stock-mania documentary debuting at South by Southwest next month. Perhaps when and if we do, however, it will give us some insight into the future Jaime Rogozinski biopic that may or may not eventually be made by disgraced Hollywood blockbuster-builder Brett Ratner. Because the key thing about the founder of Reddit community r/WallStreetBets is that he got shitcanned and kicked off the now-legendary subreddit nearly a full year before r/WallStreetBets’ moment in the sun—early 2021’s GameStop frenzy. Which Rogozinski thinks was bullshit anyway.”
“IRS Nominee Says Agency Won’t Increase Audits Of Middle-Income Filers” (Washington Post). “The White House tapped Daniel Werfel, a longtime federal budget official who briefly served as acting IRS commissioner in 2013, to lead the tax agency as it receives an additional $80 billion over 10 years to revitalize its operations, increase enforcement on wealthy taxpayers and corporations, and modernize its decades-old information technology infrastructure. The money was approved as part of the Inflation Reduction Act backed by Biden and congressional Democrats.”
“Authorities Step Up Their Crypto Crackdown” (DealBook). “Atop the crypto crime blotter on Friday is the S.E.C.’s decision to charge Singapore-based Terraform Labs and its founder Do Kwon with orchestrating a multibillion dollar fraud. That announcement came as a federal judge in New York signaled that Sam Bankman-Fried, the founder of the bankrupt crypto exchange, FTX, could be facing jail time — and certainly harsher bail terms — unless he cuts back on his internet habits.”
What we’re reading (2/17)
“It’s A Richcession, Not A Recession. Here’s Your Investing Playbook.” (Wall Street Journal). “While recessions dent many people’s financial well-being, the poor and lower middle classes are often hardest hit. They usually experience greater job losses, have less savings to lean on when paychecks run dry and, once the economy recovers, the skills they have to offer might no longer be in demand. That isn’t happening now.”
“BofA Says Hard Landing To Hit Stocks In Second Half” (Bloomberg). “The delayed arrival of a US recession will weigh on stocks in the second half of the year, according to Bank of America Corp. strategists, who say a resilient economy thus far means interest rates will stay higher for longer.”
“The S&P 500 Is The Most Popular And Overpriced Benchmark In The World” (Forbes). “Two investing bubbles are currently inflating the S&P 500’s valuation beyond most comparable benchmarks, and they are a biproduct of ODTE options and passive investing.”
“Hindenburg Bet Against India’s Adani Puzzles Rival U.S. Short Sellers” (Reuters). “When Hindenburg Research revealed a short position in Adani Group last week, some U.S. investors said they were intrigued about the actual mechanics of its trade, because Indian securities rules make it hard for foreigners bet against companies there. Hindenburg's bet has been lucrative so far. Its allegations, which the Indian conglomerate has denied, have wiped out more than $80 billion of market value from its seven listed companies and knocked billionaire Gautam Adani from his perch as the world's third-richest man.”
“Bing’s A.I. Chat: ‘I Want to Be Alive.😈” (New York Times). “On Tuesday night, I had a long conversation with the chatbot, which revealed (among other things) that it identifies not as Bing but as Sydney, the code name Microsoft gave it during development. Over more than two hours, Sydney and I talked about its secret desire to be human, its rules and limitations, and its thoughts about its creators. Then, out of nowhere, Sydney declared that it loved me — and wouldn’t stop, even after I tried to change the subject.”
What we’re reading (2/15)
“WallStreetBets Founder Sues Reddit” (Wall Street Journal). “Jaime Rogozinski, creator of the community that sent untold numbers of individual investors piling into meme stocks two years ago, filed a lawsuit against Reddit. Mr. Rogozinski is accusing the social-media platform of breaching contract by ousting him from his role as a WallStreetBets moderator in 2020 and infringing on his right to trademark the WallStreetBets brand, among other complaints.”
“NFT Intellectual Property Risks Get Real In MetaBirkins Case” (Dealbreaker). “While the damages amount may seem modest, the impact of this case promises to resound loudly going forward. We have already crept into 2023, and we already have two big-time trademark jury verdicts out of the SDNY to ruminate on.”
“A Big Breakup at the Federal Trade Commission” (DealBook). “In a blunt breakup letter published on Tuesday in The Wall Street Journal, Commissioner Christine Wilson, a Republican antitrust lawyer appointed by former President Donald Trump in 2018, announced that she would ‘soon resign’ so as not to legitimize ‘lawlessness’ under Khan. She signed off with sharp words: ‘Consider this my noisy exit.’”
“This February, Americans Could Spend As Much As $2.3 Million On Eggs alone” (Insider). “Grocery prices for main household staples have increased at an alarming rate, but the pricing of eggs has skyrocketed. And the rising price of eggs at Walmart, Costco, Aldi, and other stores in the US is putting a large dent in household budgets.”
“Doctors Are Disappearing From Emergency Rooms As Hospitals Look To Cut Costs” (KHN). “This staffing strategy has permeated hospitals, and particularly emergency rooms, that seek to reduce their top expense: physician labor. While diagnosing and treating patients was once their domain, doctors are increasingly being replaced by nurse practitioners and physician assistants, collectively known as ‘midlevel practitioners,’ who can perform many of the same duties and generate much of the same revenue for less than half of the pay.”
What we’re reading (2/14)
“Lael Brainard’s Fed Departure Could Leave Immediate Imprint On Inflation Fight” (Wall Street Journal). “President Biden’s reshuffle of his economic team could have its most immediate economic impact on the Federal Reserve, with the departure of the central bank’s vice chair, Lael Brainard, for the White House. Ms. Brainard’s move to lead Mr. Biden’s National Economic Council means the Fed will lose an influential top official who has advocated for a marginally less aggressive approach to raising interest rates than Fed Chair Jerome Powell.”
“There Is More Inflation Complexity Ahead” (Mohamed El-Erian, Project Syndicate). “[T]here is the possibility of what we can label ‘U inflation’: prices head back up late this year and into 2024, as a fully-recovered Chinese economy and the strong US labor market simultaneously drive persistent services inflation and higher goods prices. I would put the probability of this outcome at 25%.”
“Why The balloon And UFO Affairs Are A Sputnik Moment” (Vox). “Balloons are an old technology, susceptible to high winds, but their vulnerabilities also translate into advantages, as they fly low enough to avoid detection, says George Nacouzi, a senior engineer at the Rand Corporation. He predicts ‘some focus on anti-balloon technology,’ including ‘balloon killers.’”
“Is The Metaverse Already Dead?” (Fast Company). “[T]he metaverse buzz has subsided. Google Trends, which tracks search terms over time, shows interest in the term having peaked around the time Mark Zuckerberg staked Facebook’s future on building an immersive 3D world and adopted Meta as the company’s new corporate identity. Since then, metaverse search activity has tumbled back to roughly where it was in the first place.”
“Are Elite Schools Institutes Of Higher Learning Or Higher Income?” (Dealbreaker). “For decades now, elite colleges have positioned themselves as the gatekeepers of prestige and economic opportunity, and have stood as shorthand for a person being educated. Why mention a person’s diligence toward their studies, organizational skills, and blinding brilliance when you could just say ‘They went to Yale’ instead? From SATs to LSATs and all the other acronym-heavy entrance exams these institutions use as bedrock evidence for the notion that entrance to these hallowed halls are based in meritocracy and not the amount of coin that you — or your parents — can line university coffers with, is that really the case? An antitrust case alleging price fixing is trying to get to the root of it, and the plaintiffs have just made some major progress toward finding out.”
What we’re reading (2/11)
“AQR Continues To Shine” (Institutional Investor). “AQR continued to roll in January, fresh of its best year ever for several of its strategies. The quant-driven firm’s Absolute Return strategy — AQR’s broadest and longest-running multistrategy offering, launched in 1998 — gained a net 2.2 percent in January[.]”
“Beat It (Or Don’t): An Update To A Chilly Earnings Season” (Charles Schwab). “With fourth-quarter earnings season now in full swing (half of S&P 500 members have reported results at the time of this report's publishing), it's worth taking stock of the outcome thus far. Overall, results continue to skew less impressive, with downward momentum building for the blended growth rate, beat rate, and percentage by which companies are beating estimates. Profits haven't been apocalyptic by any means, but it's worth noting that the bar has been lowered significantly of late—thus making ‘beats’ seem less severe and ‘misses’ that much gloomier.”
“Louis Vuitton’s Formula For World Domination” (Wall Street Journal). “Even as it took steps to broaden its appeal, the brand put in place measures to manage the risks associated with becoming too widespread and easy to get. Its number of stores has changed little over the past 10 years, closing some as it opens others. Vuitton doesn’t sell through wholesalers and it doesn’t license its designs. There are no end-of-season sales.”
“The S.E.C. Signals A Crackdown On Another Crypto Practice” (New York Times). “The S.E.C.’s decision to charge the crypto exchange Kraken with securities violations over a popular way for the industry to make money sent more chills down the spines of executives across the sector. At 7:40 a.m. Eastern, the price of Bitcoin traded at $21,757, down nearly 3.9 percent in the past 24 hours. Crypto companies — and skeptics of the agency’s approach to regulation — now worry what new limits the agency will seek to impose on the industry.”
“Google Just Told Laid Off Workers That It Miscalculated The Amount Of Stock They’ll Get In Their Severance. And Some Employees Will Get Less Than Expected.” (Insider). “‘First we want to apologize for an inaccurate calculation that appeared in the initial notification email. The severance package that we explained in the support site, detailed documentation and publicly was correct, but it was inaccurately reflected in the email we sent,’ the email, which Insider obtained a copy of, reads.”
What we’re reading (2/10)
“Why Investors Are Piling Into Funds That Promise Not To Beat The Stock Market” (Wall Street Journal). “The prospect of getting most of the market’s upside, less of the downside and big steady dividends along the way sounds like an investing paradise. No wonder the JPMorgan fund took in $12.9 billion in new money last year—the biggest annual haul for any actively managed ETF ever. Three covered-call funds from Global X, linked to the Nasdaq-100, S&P 500 and Russell 2000 indexes respectively, attracted a combined $5.2 billion in 2022. So far in 2023, approximately $3 billion more has flowed into these four funds alone.”
“Risk And Regret” (Morgan Housel). “Daniel Kahneman once said an important part of becoming a good investor is having a well-calibrated sense of your future regret. You need to accurately understand how you’ll feel if things turn out differently than you hoped. Maybe regret is the best definition of risk.”
“For More Certainty In Your Retirement Portfolio, Consider Annuities” (New York Times). “With interest rates on the rise, many annuities have become even more attractive. Consumers poured money into both simple annuities that work much like bank certificates of deposit, as well as more complicated products that offer a cushion against stock market losses. Paycheck annuities — which provide a guaranteed stream of income for life — also made something of a comeback.”
“Is It Risk-On Again?” (The Capital Spectator). “This year’s rebound in asset prices around the world suggests that investor sentiment is shifting to risk-on after a year of playing defense. Trying to divine the future for pricing is always precarious, especially in the near term. But there’s no charge for looking at proxies of key market trends through various ETF pairs. As we’ll see, certain slices of markets are predicting a new bull run, but it’s still early to ring the all-clear signal, according to a broad measure of US stocks relative to US bonds, which is arguably a more reliable indicator. But let’s start with the sizzle.”
“Stock buybacks Don’t Really Matter” (Noahpinion). “[I]n practice, making repurchases more expensive likely won’t do much to increase hiring or wages. But there’s another reason lots of people want to tax or even ban buybacks; they think buybacks pump up the price of a company’s shares, giving an untaxed windfall to shareholders. Interestingly, this is also wrong; as I’ll explain, a stock buyback should have only a small effect on the price of the stock, and it’s not clear whether the effect will be positive or negative.”
What we’re reading (2/9)
“Utopia Or Bust” (Bradford Delong, Project Syndicate). “The grand narrative of 1870-2010 was about technological triumph, coupled with social-organizational failure. The post-2010 grand narrative has yet to be written, mainly because humanity has been taking hesitant steps in at least four directions.”
“What Recession? Some Economists See Chances Of A Growth Rebound.” (New York Times). “Many economists and investors had a clear narrative coming into 2023: The Federal Reserve had spent months pushing borrowing costs rapidly higher in a bid to tame inflation, and those moves were expected to slow growth and the labor market so much that the economy would be at risk of plunging into a downturn. But the recession calls are now getting a rethink.”
“Yahoo To Lay Off 20% Of Its Workforce” (CNN Business). “A Yahoo spokesperson told CNN that the company’s legacy ad tech division, Yahoo for Business, will be overhauled and transformed into a new division called Yahoo Advertising. As part of that change, Yahoo plans to cut nearly 50% of the division this year, ‘including nearly 1,000 employees this week,’ the spokesperson said.”
“Layoffs Watch ’23: JPMorgan Chase” (Dealbreaker). “Mortgage rates are dropping. The housing market is showing signs of life. Refinancings are up. Manhattan rents are higher than ever. All too late, apparently, for some hundreds of JPMorgan mortgage employees about to join the thousand or so of their former colleagues (and 6,000 other new layoff victims) in the tightest job market in a half-century.”
“Mass Layoffs Or Hiring Boom? What’s Actually Happening In The Jobs Market” (Wall Street Journal). “The U.S. added 1.1 million jobs over the past three months and ramped up hiring in January. That appears puzzling, given last year’s economic cool down, signs that consumers are pulling back on spending as their savings dwindle, and a stream of corporate layoff announcements, particularly in technology. Driving the jobs boom are large but often overlooked sectors of the economy. Restaurants, hospitals, nursing homes and child-care centers are finally staffing up as they enter the last stage of the pandemic recovery. Those new jobs are more than offsetting cuts announced by huge employers such as Amazon.com Inc. and Microsoft Corp.”
What we’re reading (2/8)
“Third Point Has A Stake In Salesforce” (Wall Street Journal). “Third Point is known for taking stakes and pushing for change at blue-chip companies including Campbell Soup Co., Shell PLC and Walt Disney Co., with which it reached a settlement agreement last year. The size of the position and what Third Point’s plans are couldn’t be learned. It is possible the firm will stay quiet and not launch a campaign.”
“Microsoft Will Let Companies Create Their Own Custom Versions Of ChatGPT, Source Says” (CNBC). “Microsoft is seeking to capitalize on the attention in multiple ways. The company provides the cloud-computing back end for ChatGPT, and in January Microsoft said it had invested billions of dollars in OpenAI. Microsoft has also been working to incorporate OpenAI technologies into its own products. On Tuesday, Microsoft announced that it is augmenting Bing, its search engine, and Edge, its internet browser, with ChatGPT-like technology.”
“Google Chatbot Blunders As AI Battle With Microsoft Heats Up” (AFP). “Google on Wednesday announced a slew of features powered by Artificial Intelligence (AI), but a mistake in an ad caused its share price to tank. The search engine giant is rushing into the space after the bot ChatGPT caught the imagination of web users around the world with its ability to generate essays, speeches and even exam papers in seconds.”
“Revisiting The Summer Of Stagflation” (Paul Krugman, New York Times). “What is clear, however, is that until a few months ago many if not most economic prognosticators were far too negative about America’s prospects. In particular, we went through what I think of as the summer of stagflation — a period, actually extending some way into fall, when many influential economists were making extremely grim pronouncements about what it would take to bring inflation under control.”
“The Core Principles Of Momentum Investing” (Validea). “There is some debate as to why momentum works in public companies, but the most popular reason relates to the fact that public companies have prices that are regularly quoted and many investors buying and selling them. This introduces all the biases we all suffer from as human beings into the process. I won’t get into all the details here, but the end result is that we often tend to underestimate the good news with companies that have performed well in the intermediate term. That obviously won’t be true for every company, but it is true for a group of them. By investing in a basket of these companies, an investor can benefit from this mispricing and generate an excess return. This is what is often referred to as the behavioral explanation for momentum.”
What we’re reading (2/7)
“Holding Our Breadth” (AQR Capital Management). “Of all the correlations in the world, the one between stocks and bonds is undoubtedly of greatest interest to investors. This important number was generally negative for the first two decades of the 2000s, but that wasn’t the case in the preceding decades, and might not be the case going forward. Why does this matter? If stocks and bonds (and stock- and bond-related asset classes) become more correlated to each other, then investors’ overall portfolios become riskier.”
“Fed Chair Powell Says Inflation Is Starting To Ease, But Interest Rates Still Likely To Rise” (CNBC). “Federal Reserve Chairman Jerome Powell said Tuesday that inflation is beginning to ease, though he expects it to be a long process and cautioned that interest rates could rise more than markets anticipate if the economic data doesn’t cooperate.”
“Stocks Close Higher After Powell Remarks” (Wall Street Journal). “Stocks started Tuesday morning lower, but gained ground shortly after Mr. Powell began speaking in a broadcast conversation with Carlyle co-founder David Rubenstein. A flurry of selling then sent indexes back into the red, but stocks regained positive territory later in the afternoon.”
“Disney Has Bigger Problems Than Ron DeSantis” (CNN Business). “Disney has found itself in the middle of a culture war battle that could end up transferring Disney World’s governance to a board appointed by Florida Gov. Ron DeSantis. And that may be the least of Disney’s problems. The company faces a media industry in turmoil, plunging cable subscriptions, a still-recovering box office, massive streaming losses, activist shareholders, possible reorganization and layoffs and growing labor disputes with employees. That’s a lot for CEO Bob Iger to handle.”
“How Gen Z And The Great Resignation Created A Wave Of Pverinflated Job Titles” (Insider). “Since 2019, employers have tripled their use of the word ‘lead’ in early-career tech jobs, upped their use of "principal" by 57%, and cut their use of the word ‘junior’ by half. ‘It was shocking to me how dramatic it's been,’ says Maryam Jahanshahi, the head of R&D at Datapeople. ‘It’s rampant in lots of different types of jobs.’”
What we’re reading (2/6)
“Housing Market Shows Signs Of Thawing” (Wall Street Journal). “Falling mortgage rates are beginning to stir demand in the housing market. The average 30-year home loan rate has come down by just about a full percentage point from a 20-year high above 7% in November, largely in response to signs that the Federal Reserve is nearly finished lifting rates. That has brought some new buyers into the market.”
“Musk’s Twitter Has Just 180,000 U.S. Subscribers, Two Months After Launch” (The Information). “Around 180,000 people in the U.S. were paying for subscriptions to Twitter, including Twitter Blue, as of mid-January, or less than 0.2% of monthly active users, according to a document viewed by The Information. The tiny number signals the challenge Elon Musk faces in turning the subscription product into a major source of revenue.”
“Is The Economy Kind Of Good Now?” (Vox). “It might be time to open up a perhaps surprising possibility here, at least if you’ve been paying attention to the chatter around high-profile layoffs and a potential recession. The economy seems like it’s … kind of in a pretty decent spot.”
“Hot January Jobs Report Presents Puzzle for Investors” (Morningstar). “The January jobs report showed the opposite of what many investors and economists had expected: Instead of an economy heading toward a recession, the job market carried on at a confoundingly strong pace.”
“Google Unveils Its ChatGPT Rival” (CNN Business). “Sundar Pichai, CEO of Google and parent company Alphabet, said in a blog post that Bard will be opened up to ‘trusted testers’ starting Monday, with plans to make it available to the public “in the coming weeks.’ Like ChatGPT, which was released publicly in late November by AI research company OpenAI, Bard is built on a large language model. These models are trained on vast troves of data online in order to generate compelling responses to user prompts.”
What we’re reading (2/3)
“Value Stocks? Growth Stocks? Markets Last Year Turned Everything Topsy-Turvy.” (New York Times). “The new growth stocks, in the estimation of S&P Dow Jones Indices, an influential market analysis firm, now include fossil-fuel energy companies. The world has changed radically in the last year or two, and traditional categories, like growth and value, are topsy-turvy.”
“Unemployment Falls To 3.4%, Lowest In 53 Years, Jobs Report Shows” (Wall Street Journal). “The unexpectedly strong hiring gains raise questions about whether the economy, which had been losing momentum over the past several months, is starting to pick up steam again. If so, that could prompt a more aggressive response by the Federal Reserve as it raises interest rates in an attempt to temper economic growth and bring down inflation.”
“In Boost For Ford And Tesla, Treasury Changes EV Tax Rules Making It Easier To Qualify As An SUV” (CNN Business). “With new rules now in effect for electric vehicle tax credits, that answer could mean thousands of dollars to some car buyers and lots of money to automaker profits. Under the new regulations, car buyers can’t claim tax credits for cars costing more than $55,000. But, for SUVs, the sticker price can be as high as $80,000. Until now, the Treasury Department considered the Mustang Mach-E a car, not an SUV, for purposes of tax credits. Same with the Tesla Model Y, unless it was equipped with a third row of seats.”
“NSA Wooing Thousands Of Laid-Off Big Tech Workers For Spy Agency’s Hiring Spree” (The Washington Times). “The National Security Agency is doggedly courting laid-off Big Tech workers as the spy agency undertakes one of its largest hiring surges in the last 30 years. The NSA began privately reaching out to Big Tech employees over LinkedIn last fall, as word spread that major American companies such as Meta and Amazon were bleeding tens of thousands of skilled workers.”
“Is Meta Actually Making A Comeback?” (Gizmodo). “Zuckerberg made clear he isn’t retreating from the Metaverse, but during the most recent earnings call with investors he appeared to reorient his focus towards solving more near-term business challenges. 2023, Zuckerberg said, would be the ‘Year of Efficiency.’ The CEO jumpstarted that “nimble” efficiency in November by axing around 11,000 of its workers, the largest round of layoffs in Facebook history. Cold-hearted investors clapped.”
What we’re reading (2/1)
“Fed Slows Its Tightening With Quarter-Point Interest Rate Rise” (Wall Street Journal). “The Federal Reserve nudged up short-term interest rates by a quarter-percentage point and signaled it was on track to do so again at its meeting next month while officials consider whether and when to pause increases late this spring. The decision Wednesday to raise the Fed’s benchmark federal-funds rate followed six larger, consecutive increases to combat inflation, which hit a 40-year high last year. Officials raised rates by a half point in December and by 0.75 point in November.”
“Americans Are In For More Economic Pain This Year As The Fed Signals Its War On Inflation Will Continue” (Insider). “On Wednesday, the Federal Reserve announced it's raising interest rates 25 basis points — a slowdown from December's 50 basis point increase. It's a sign the Fed is responding to recent data showing the country is recovering from the pandemic, with inflation slowing (now at a level of 6.5% year-over-year in December) and the economy growing, and it's the bank's latest effort to get the country to the pre-pandemic 2% level of inflation.”
“Bond King Jeffrey Gundlach Says He Expects One More Fed Rate Hike” (CNBC). “DoubleLine Capital CEO Jeffrey Gundlach said he sees one additional rate hike from the Federal Reserve before the central bank ends its tightening cycle. ‘I think one more,” Gundlach said Wednesday on CNBC’s ‘Closing Bell: Overtime.’ ‘I think it’s tough to make the statement ‘ongoing increases’ with an ‘s’ at the end of the word ‘increase’ and do zero unless you had very substantial change in economic conditions.’”
“The Private Markets Valuation Debate Isn’t Settled Yet” (Institutional Investor). “Private equity and venture capital firms mark, or assign value to, their portfolios on a quarterly basis. Their limited partners receive that data a few weeks after the quarter ends. Audited on an annual basis, these numbers can be adjusted by managers based on certain metrics. At present, private investment valuations lag the public markets, although that could soon change as the valuations, audited in December, begin to trickle in.”
“Are NFTs Actually... Interesting? This Suit Could Be Precedent Setting” (Dealbreaker). “If you were hearing about this story at the watercooler or company-compelled Zoom socializing effort, you’d expect copyright infringement to be at the top of the list, no? You learn something everyday. This case spins on if RC/BAYC has any merit-bearing defenses rooted in artistic value or free speech. The US District Court for Central District of California held a resounding ‘Nah’.”
February picks available now
The new Prime and Select picks for January are available starting now, based on a model run put through today (January 30). As a note, we’ll be measuring the performance on these picks from the first trading day of the month, Wednesday, February 1, 2023 (at the mid-spread open price) through the last trading day of the month, Tuesday, February 28, 2023 (at the mid-spread closing price).
What we’re reading (1/29)
“Breakup Of Google’s Ad Business Would Reshape $500 Billion Sector” (Wall Street Journal). “Google spent the better part of two decades building the world’s most powerful digital advertising machine. Breaking it up would send shock waves through the $500 billion online-ad market.”
“‘Buy Now, Pay Later’ Is The Victim Of Its Own Success” (DealBook). “Last Tuesday was a rough day for Goldman Sachs. The share price fell 6 percent after the Wall Street giant reported its worst earnings miss in a decade. On a call that morning, analysts peppered David Solomon, the bank’s C.E.O., with questions about its consumer banking strategy, and about one unit in particular, GreenSky. Goldman closed its $2.2 billion acquisition of GreenSky, a pioneer in the “buy now, pay later” (B.N.P.L.) lending sector, in March, calling it a key piece in its strategy to build “the consumer banking platform of the future.” It flew under the radar until last quarter, the first in which Goldman broke out earnings for its “platform solutions” business unit, which includes GreenSky. The picture wasn’t pretty. Revenues were up, but the division lost $1.66 billion in 2022.”
“What’s Passive Income? It’s Not What Influencers Say It Is.” (New York Times). “Search ‘passive income’ on YouTube, TikTok or Reddit and you’ll find a wealth of videos by people claiming they make thousands of dollars each month this way — whether they sell courses, e-books or other products online; offer property on short-term rental platforms like Airbnb and VRBO; or even buy and maintain vending machines in high-traffic buildings. The allure: Theoretically, it’s easier than a traditional 9-to-5 ‘job.’”
“When You Can’t Speak To The Manager — Or Anyone” (Vox). “There’s been a breach of the Jonny Boston’s International Facebook page. Jonathan Kiper, the New Hampshire restaurant’s owner, is no longer able to access his personal Facebook account or, in turn, the page for his business, where he once kept customers updated about specials and deals. He’s tried to get back in, going through the online process to report his account as compromised multiple times and sending in a picture of his driver’s license to prove he’s, well, himself. But thus far, his efforts have been to no avail. He always gets tripped up at the last verification step — the one where Facebook sends a test code — because it appears the hacker has changed the account’s phone number. It’s actually two phone numbers that are at the heart of Kiper’s problem: the hacker’s and Facebook’s, or rather, Facebook’s lack thereof.”
“In Texas Oil Country, An Unfamiliar Threat: Earthquakes” (New York Times). “The West Texas earth shook one day in November, shuddering through the two-story city hall in downtown Pecos, swaying the ceiling fans at an old railroad station, rattling the walls at a popular taqueria. The tremor registered as a 5.4-magnitude earthquake, among the largest ever recorded in the state. Then, a month later, another of similar magnitude struck not far away, near Odessa and Midland, twin oil country cities with relatively tall office buildings, some of them visible for miles around.”
February picks available soon
We’ll be publishing our Prime and Select picks for the month of February before Wednesday, February 1 (the first trading day of the month). As always, we’ll be measuring SPC’s performance for the month of January, as well as SPC’s cumulative performance, assuming the sale of the January picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Tuesday, January 31). Performance tracking for the month of February will assume the February 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 (Wednesday, February 1).
What we’re reading (1/27)
“Stocks Close Higher Friday, Nasdaq Posts Fourth Week Of Gains” (CNBC). “All the major averages posted a positive week and are on pace for a month of gains. The tech-heavy index rose 4.32% and closed out its fourth week of gains. It’s on pace for its best monthly performance since July. The S&P and Dow added 2.47% and 1.81%, respectively, this week.”
“Consumer Spending Fell 0.2% In December As Inflation Cooled” (Wall Street Journal). “Consumer spending fell a seasonally adjusted 0.2% in December from the prior month, the Commerce Department said Friday, the second straight monthly drop following solid spending increases during several months last year. Adjusted for inflation, spending fell 0.3% last month.”
“How Much Does Aging Really Hurt A Country?” (Noahpinion). “[I]f aging demographics are a source of national weakness, then the developed democracies are in much the same boat as China. Median ages have actually converged, and all the industrialized countries are expected to age substantially in the decades ahead[.]”
“Microsoft Is Beating Google At Its Own Game” (Vox). “Microsoft appears to be on the cusp of being something it hasn’t been in a long time: cutting-edge. It’s a label the company lost a long time ago after a series of small startups grew to become Microsoft’s biggest competitors. Google, for example, started out as a nimble, innovative upstart and eventually bested Microsoft in browsers, email, and mobile operating systems. But now Microsoft might be the nimble, innovative company that bests Google in artificial intelligence. And it’s all thanks to OpenAI.”
“Mark Zuckerberg Reportedly Said He Doesn't Like Seeing ‘Managers Managing Managers,’ Fueling Speculation Of More Layoffs” (Insider). “Meta is among the slew of tech giants that have been drastically downsizing their workforces over the past several months, like Twitter, Amazon, Microsoft, and Google. The mass layoffs have left many in the tech industry panicked uncertain about the future of the industry.”
What we’re reading (1/25)
“Hedge Funds Lost More Than $200 Billion Last Year” (Institutional Investor). “In the market’s worst year since the financial crisis of 2008, hedge funds lost $208.4 billion, according to an annual report by LCH Investments Chairman Rick Sophers. Almost 9 percent of those losses are attributable to one hedge fund firm — Chase Coleman’s Tiger Global.”
“IBM To Cut 3,900 Jobs Amid Broader Tech Slowdown” (Wall Street Journal). “International Business Machines Corp. on Wednesday joined the wave of companies making layoffs, saying it would cut about 3,900 jobs. The cuts will stem from Kyndryl Holdings Inc., the IT services business that IBM spun off last year, and its healthcare divestiture, from which the company will incur about a $300 million charge, a spokesman confirmed.”
“A Short Seller Takes Aim At An Indian Corporate Giant” (DealBook). “Hindenburg Research, the short seller that rose to prominence by going after unprofitable blank-check firms and crypto companies, is pursuing its biggest targets yet: the Indian conglomerate Adani Group and its billionaire founder, Gautam Adani, whom Forbes ranks as the world’s third-richest person. Just as India’s stock market opened this morning, Hindenburg issued a lengthy report which claims that Adani pulled off ‘the largest con in corporate history.’"
“Does America Have Too Much Debt?” (New York Times). “[M]y view is that we’ll probably be headed back to an era of low interest rates. Markets also expect the Fed to unwind many of its recent rate hikes, although not all of them. This could all be wrong, but if we find ourselves back in a low-interest-rate world, that will also be a world in which trying to reduce the debt would cause a lot of economic problems at a time when the Fed lacked its best tool for dealing with them.”
“The Psychedelic Industrial Complex Is Evil” (UnHerd). “The faith we once put in transcendent states has been swiftly industrialised. A scan of the current psychedelic market reveals a strange mix of Big Pharma and young start-ups, such as ATAI, a Peter Thiel-funded firm. Its founder, Christian Angermayer, has been accused of manoeuvring to dominate the psychedelic market through zealous patenting strategies. He envisions his trials as perpetuations of mystical traditions from Ancient Greece. More than 2,000 years later, though, ‘profane illumination’ is now under the microscope, dissected, refashioned as a tool. Only when validated in scientific, psychiatric discourse is it taken seriously. The industrial boom has happened in tandem with an enormous amount of research, much of it funded (with likely biasing effects) by profit-driven entities.”
What we’re reading (1/24)
“Microsoft Earnings Fell Last Quarter Amid Economic Concerns” (Wall Street Journal). “Microsoft Corp. recorded its slowest sales growth in more than six years last quarter as demand for its software and cloud services cooled on concerns about the health of the global economy.”
“U.S. Accuses Google Of Abusing Monopoly In Ad Technology” (New York Times). “The Justice Department and a group of eight states sued Google on Tuesday, accusing it of illegally abusing a monopoly over the technology that powers online advertising, in the agency’s first antitrust lawsuit against a tech giant under President Biden and an escalation in legal pressure on one of the world’s biggest internet companies.”
“Netflix’s New Chapter” (Stratechery). “The simplified story of Netflix’s founding starts with Reed Hastings grumbling over a $40 late charge from Blockbuster, and ends with the brick-and-mortar giant going bankrupt as customers came to prefer online rentals from Netflix, with streaming providing the final coup de grâce. Neither are quite right.”
“A Married Couple With A 4-Month-Old Baby Were Both Laid Off By Google, While One Of Them Was On Parental Leave” (Insider). “A husband and wife with a 4-month-old baby said they were both hit Friday by Google's mass layoffs. Allie and Steve, who asked to go by their first names only but whose identities are known to Insider, had both relocated to California when Allie started working for the tech giant six years ago. Steve began working at the company about two years later.”
“How These Dog Walkers Make Over $100,000 A Year” (New York Times). “Dressed in black leggings and a puffer jacket, Bethany Lane, 35, was walking down Bleecker Street in Manhattan last Friday afternoon with a pack of three goldendoodles and one bernedoodle named Tinkerbelle. They poked their noses into the Whalebone store to collect some treats, before trotting along the Hudson River Park and having their photos taken by several tourists.”