What we’re reading (7/11)
“Why The Fed Wants A Good Inflation Report — But Not A Good Jobs Report” (CNN Business). “‘Any news that inflation continues above that target rate or if the pace at which the rate of inflation is coming down is slowing is bad news for the Fed,’ said Sean Snaith, director of the Institute for Economic Forecasting at the University of Central Florida.”
“Historic Rate Increases Leave Some On Wall Street Wanting More” (Wall Street Journal). “One popular Wall Street gauge, published by Goldman Sachs, suggests that financial conditions are doing less to cool the economy than they were earlier this year. Goldman economists argue that an economic index newly published by the Fed overestimates how much previous rate increases will start to pull down growth in the months ahead.”
“Worker Strikes Grip Los Angeles As Nation Faces ‘Hot Labor Summer’” (Washington Post). “Workers in Los Angeles are feeling emboldened as they eye post-pandemic corporate profits and sky-high housing costs, and after a cascade of successful walkouts in Southern California and beyond. They are striking for higher pay and better working conditions, even if it means taking a financial risk and hampering life in the nation’s second most populous city. Just Monday, several thousand workers from hotels near the Los Angeles International Airport walked off the job, disrupting travelers.”
“Threads Is Not An Automatic Win For Meta” (Slate). “With a fast-expanding user base and support from its parent company, Threads appears destined to stick around for a bit. And while there’s opportunity for Meta, its new social network is not without risk. In its pursuit of cultural relevance and added revenue, Meta has opened itself to distraction in its fight against TikTok. Threads may also dilute its core apps, weakening their network effects. Here are four opportunities, and two big risks, to consider.”
“Mark Zuckerberg’s Threads Poses A Conundrum For Regulators” (DealBook). “In an era of tighter antitrust scrutiny of Big Tech in the United States, in Europe and elsewhere, what questions does Meta’s effort to extend its social media reach raise about the industry’s ability to expand into new areas — even when players build new services themselves, rather than buy a smaller foe?”
What we’re reading (7/10)
“Why Hedge Fund Managers Are Worried About The Rest Of 2023” (Institutional Investor). “The average measure of confidence, which managers score on a scale ranging from +50 to –50 was 14.2 according to AIMA. The industry group polled 408 hedge fund managers with $3.3 trillion in assets during the week of June 23. The historic average has been 17.5.”
“Five Ways The Bull Market Makes Investors Nervous” (Wall Street Journal). “A familiar question has crept back onto Wall Street: Could this be the most-hated bull market ever? The S&P 500 charged into bull-market territory in the first six months of 2023, marking a 20% rally from a recent low, yet investors say they can’t stop looking over their shoulders. Even after U.S. stocks overcame big risks—including repeated interest-rate hikes and a banking crisis—money managers say they aren’t convinced this rally is sustainable.”
“Home Prices Are Hitting New Highs Again, As High Rates Put The Squeeze On Supply” (CNBC). “Home prices hit a record high in May, rising 0.7% nationally compared with April at a seasonally adjusted rate, according to the Black Knight Home Price Index. Prices, which have been rising since January, were 0.1% higher in May than a year earlier. The sharp jump in mortgage interest rates last year threw cold water on an overheated housing market, but it didn’t last long. Even with rates still high, home prices are now gaining again, and the gains are accelerating with each new month.”
“When Beer Goes Flat” (Slate). “The overall business picture of beer is that it’s in decline. But the decline is not a free fall. Beer is still, by far, the most widely consumed alcoholic beverage by volume. In fact, overall alcohol consumption had actually increased in the past couple of decades leading into 2021. So, when alcohol industry analysts say beer is falling, they’re talking about beer losing market share of retail dollars. In 2022 spirit sales amounted to 42.9 percent, and beer accounted for 41.2 percent—its first year in second place.”
“Turkey Agrees To Support Sweden’s NATO Bid, Clearing Main Obstacle” (New York Times). “Turkey agreed on Monday to clear the way for Sweden to join NATO, a sudden reversal just hours after President Recep Tayyip Erdogan said that the European Union should first advance his country’s bid to join the E.U. bloc. NATO’s secretary general, Jens Stoltenberg, announced Turkey’s decision from Vilnius, Lithuania, where the alliance was preparing to open its annual summit on Tuesday. Mr. Stoltenberg said that Mr. Erdogan had lifted his objections to Sweden’s entry into the alliance and would take the country’s bid to his Parliament for ratification as soon as possible.”
What we’re reading (7/9)
“Recharged Bond Rout Unnerves Investors” (Wall Street Journal). “Last week, the yield on the benchmark 10-year Treasury note, which rises when bond prices fall, topped 4% for the first time since early March, extending a two-month stretch of gains. The yield on the 2-year note hit its highest level since 2007.”
“The MTV Generation’s Unemployment Problem” (Politico). “Workers born between 1964 and 1980 — those currently aged 44 to 59 — represent ‘effectively all of the increase’ in America’s unemployed population over the last half year, according to research by Glassdoor’s Chief Economist Aaron Terrazas. As of May, those workers represented roughly a quarter of those unemployed, compared to less than 20 percent in late 2022. And it’s taking those workers much longer to find new jobs.”
“2023 Midyear Outlook: Do Equity Markets Warrant Caution Ahead?” (Commonwealth). “[B]efore last year, 1969 was…the last time stock and bond markets declined in the same year. In fact, 2022 was just the third time in history that this happened. Even if you look at quarterly data, stock and bond markets decline together only 10 percent of the time. So, while not unprecedented, last year's performance was certainly unusual.”
“Baby boomers Own Pretty Much Everything - But Millennials Could Be About To Catch Up” (Insider). “Whereas the youngest millennials are only 27 years old, the youngest baby boomer is about 60 years old. That three decade age gap highlights the dynamic that as millennials start to make more money at work, baby boomers are either already retired or on the verge of retiring within the next decade. That's exactly why Fundstrat’s Tom Lee is so bullish on the stock market in the long-term.”
“It’s Not Only NY, LA, San Francisco. Retail Crime Has Hit A Bustling Kansas Metropolis” (CNN Business). “A local Victoria’s Secret lost $30,000 a month to theft, authorities say. The Cabela’s has reportedly lost more merchandise than any other in the nation. They’re not in San Francisco, Chicago or New York, the way some might assume. They’re in Wichita, Kansas.”
What we’re reading (7/7)
“Hiring Cools As Employers Added 209,000 Jobs In June” (CBS News). “The U.S. added 209,000 jobs last month, the Labor Department reported Friday. That was in line with economists' expectations for about 205,000 new jobs in June, according to a poll of economists by FactSet. By comparison, employers added 339,000 new jobs in May, although the Labor Department on Friday revised that number downward to 306,000.”
“Is Hedging With Nontraditional Investments Worth The Effort?” (Morningstar). “Under all but highly unusual conditions, risk-tolerant investors who have moderately long horizons can earn their way out of trouble. Stocks take a beating here and there, but within a few years, they recover their losses. Safeguards prove unnecessary.”
“Read The Ingredients Before Buying This $25 Billion ETF” (Wall Street Journal). “Exactly what [value] measure to use—price to sales, price to book, price to cash flow, estimated or reported—remains a point of contention. That Microsoft isn’t cheap on any of these measures is almost universally agreed. Yet, Microsoft is the biggest holding in the S&P 500 Value index. It has done really well and has propelled the index past the other two main value gauges by the most ever over six months. The $25 billion iShares S&P 500 Value ETF (ticker IVE) has jumped 12% this year, versus less than 5% for bigger rivals using the Russell 1000 and CRSP value indexes, from FTSE Russell and Chicago’s Center for Research in Security Prices.”
“Harvard Professor Avi Loeb Believes He’s Found Fragments Of Alien Technology” (CBS News). “The research and analysis is just beginning at Harvard. Loeb is trying to understand if the spherules are artificial or natural. If they are natural, it will give the researchers insight into what materials may exist outside of our solar system. If it is artificial, the questions really begin.”
“How Will Artificial Intelligence Affect Real Interest Rates?” (Marginal Revolution). “[O]ver the centuries real rates of return seem to be falling, even though there are some high productivity eras, such as the 1920s, during that time. The long-run secular trend might overwhelm the temporary productivity blips, I simply do not know.”
What we’re reading (7/6)
“2-Year Treasury Yield Hits 16-Year High After ADP Jobs Data Shatters Expectations” (CNBC). “The 2-year U.S. Treasury yield reached a level not seen in 16 years on Thursday as investors absorbed strong jobs data that could mean further tightening from the Federal Reserve.”
“Meta’s Threads App Sees Early Success, Drawing Advertiser Interest And Twitter’s Ire” (Wall Street Journal). “In less than 24 hours, the microblogging app Threads, launched Wednesday by Meta Platforms, has signed up more than 30 million users, surged to the top of app store download charts and become a trending topic on Twitter, the social network it is hoping to upend.”
“Money Is Still Easy” (The Money Illusion). “We do know why rate increases have failed to slow the economy, if ‘we’ means market monetarists. But [Bloomberg journalist Joe] Weisenthal is right that the mainstream is puzzled by this fact.”
“American Express Is Being Investigated Over Sales Practices. Salespeople Say They Have Been Made Scapegoats.” (Insider). “Internal sales material seen by Insider, interviews with former salespeople, and the legal claims raise questions about whether senior managers knew the product was being pitched to help avoid taxes and how high up the corporate ladder the awareness went.”
“Americans Have Quit Quitting Their Jobs” (Wall Street Journal). “The surge in Americans quitting their jobs has abated since peaking during the pandemic, another sign that the labor market is cooling from ultrahot levels as the Federal Reserve raises interest rates.”
June performance update
Hi folks, here with the key monthly numbers:
Prime: +4.34%
Select: +6.79%
SPY ETF: +6.81%
Bogleheads portfolio (80% VTI, 20% BND): +5.56%
Overall, a really strong month for both Prime and (especially) Select, with neither being far off the market’s average annual return in only one month’s time. But the market overall was on fire. Tough to keep pace with that, but I’m hopeful we experience a little more persistence than the tech stocks driving the overall market index. That depends a bit on your view of whether AI will live up to the hype. We’ll see.
Stoney Point Total Performance History
What we’re reading (7/4)
“It Isn’t Just Boomers. Lots Of Older Americans Are Stock Obsessed.” (Wall Street Journal). “American retirees are investing more like 30-year-olds. Rather than follow the conventional wisdom to protect their nest eggs by shifting their investments from stocks to bonds as they age, many are rolling the dice. Nearly half of Vanguard 401(k) investors actively managing their money and over age 55 held more than 70% of their portfolios in stocks. In 2011, 38% did so. At Fidelity Investments, nearly four in 10 investors ages 65 to 69 hold about two-thirds or more of their portfolios in stocks.”
“Fireworks Have A New Competitor: Drones” (DealBook). “Increasingly, drones are lighting up skybound entertainment shows. Flocks of flying robots have created magical illusions everywhere from the 2020 Tokyo Olympics to the coronation of King Charles III this spring. And the global drone light show market, which was virtually nonexistent a decade ago, was valued at about $1 billion in 2021, according to Allied Market Research.”
“Welcome to the big blimp boom” (MIT Technology Review). “In May, the somewhat secretive Sergey Brin–backed company LTA Research, which has been working on airships since 2016, announced that it’s ready to unveil its first, the Pathfinder 1. The French company Flying Whales is developing an airship that’s lifted by helium and can haul up to 60 tons of cargo. The vehicle is controlled with a hybrid-electric propulsion system, though the company plans to eventually transition to hydrogen fuel cells, which will make its aircraft fully electric. Flying Whales has already partnered with aerospace companies to determine whether it could eventuallytransport rocket parts.”
“How To Steal A Masterpiece: Advice From The World’s Greatest Art Thief” (Time). “[Stéphane] Breitwieser, a 52-year-old Frenchman, is one of the greatest art thieves of all time. He stole over 300 works from museums and cathedrals across Europe, worth an estimated two billion dollars. While I was preparing to write a book about him, Breitwieser granted me dozens of hours of interviews, during which he revealed in great detail his criminal mind.”
“The Value Of Not Commuting To Work” (Political Calculations). “If you're one of the Americans who are able to avoid commuting while working from home, how much value are you getting from the time you're saving? For a lot of white collar employees, the opportunity to work remotely has provided a huge personal windfall. But not many people have taken a serious stab at estimating how much that value might be, either individual or for society at large.”
What we’re reading (7/3)
“Remote Work Sticks For All Kinds Of Jobs” (Wall Street Journal). “Workers in unexpected jobs are clocking more time from home than before the pandemic hit. It isn’t just white-collar workers logging in from bedrooms instead of boardrooms. Lower-income, less-educated and service-industry workers spent more time working from home, on average, last year than before the pandemic struck.”
“Spread Between 2- And 10-Year Treasuries At Deepest Inversion Since '81” (Reuters). “The closely-watched spread between the 2-year and 10-year U.S. Treasury note yields hit the widest since 1981 at -109.50 in early trade, a deeper inversion than in March during the U.S. regional banking crisis. The gap was last at -108.30 bp.”
“The True Threat Of Artificial Intelligence” (New York Times). “A.G.I. [artificial general intelligence] doesn’t exist yet, but some believe that the rapidly growing capabilities of OpenAI’s ChatGPT suggest its emergence is near. Sam Altman, a co-founder of OpenAI, has described it as ‘systems that are generally smarter than humans.’ Building such systems remains a daunting — some say impossible — task. But the benefits appear truly tantalizing.”
“America’s Factory Building Boom” (Wall Street Journal). “Congress passed two measures last year that aimed, in part, to build America’s manufacturing capacity back up. While the ultimate economic ramifications of these moves will take years to play out, this much is certain: If you spend it, they will build.”
“What Apple Did To Hit $3 Trillion” (Slate). “[W]hile it seems like Apple shouldn’t be setting all-time stock market highs, and shouldn’t be up 53 percent this year, the company is much better positioned to remain at the $3 trillion level than when it first reached it, briefly, in early 2022. With a whole lot of cash, a little financial manipulation, and a growing services business, Apple has thrived in a period of rising interest rates. And now that the worst of a tough economic moment is likely behind it, it’s set to flourish in the rebound ahead.”
July picks available now
The new Prime and Select picks for July are available starting now, based on a model run put through today (June 30). As a note, we’ll be measuring the performance on these picks from the first trading day of the month, Monday, July 3, 2023 (at the mid-spread open price) through the last trading day of the month, Monday, July 31, 2023 (at the mid-spread closing price).
What we’re reading (6/29)
“Powell Says Fed’s Inflation Fight Could Take Years” (Wall Street Journal). “The world’s major central banks have an unexpected problem: Their economies are surprisingly strong.The Federal Reserve is likely to keep lifting interest rates even though officials this month decided to slow the pace of increases by holding off on another move higher, Chair Jerome Powell said Wednesday.”
“Huge New York Landlord Says Fridays In The Office Are ‘Dead Forever’ — And Mondays Are ‘Touch-And-Go’” (Insider). “It looks like we're never going back to the office full-time — at least not every day of the week. One of New York's biggest private landlords, Vornado Realty Trust, is betting on whether hybrid work is here to stay. The firm's chairman, Steven Roth, recently told investors that office work on Fridays was likely ‘dead forever.’”
“The Nuclear Industry’s Big Bet On Going Small” (Vox). “Small modular reactors (SMR) have emerged as one of the most popular approaches for the next generation of nuclear power plants. Rather than designing giant, custom-crafted reactors at sprawling power plants that churn out gigawatts of electricity, industry stalwarts and startups are now developing smaller, factory-built atom splitters. In theory, they could be deployed cheaper and faster than current designs, meeting existing needs for power while filling new niches in the economy like hydrogen production. The hope is that SMRs could bypass or overcome some of the biggest obstacles to nuclear energy and the transition to clean energy.”
“No Job, No Marriage, No Kid: China’s Workers And The Curse Of 35” (New York Times). “It’s widely discussed in China: Employers don’t want you after 35. Some job listings say it plainly, leaving a generation of prime-age workers feeling defeated.”
“Sriracha Sauce Is Selling For As Much As $120 Amid Prolonged Shortage” (CNN Business). “Prices of Sriracha sauce are as high as $70 on eBay as people look to snap up the spicy sauce — and they’re even steeper on Amazon, up to $124. Huy Fong Foods, which makes the rooster-adorned bottled sauce, has been dealing with a years-long shortage of the chilis, which is hurting production and causing some shortages.”
What we’re reading (6/28)
“Is It A ‘Richcession’? Or A ‘Rolling Recession’? Or Maybe No Recession At All?” (Associated Press). “The warnings have been sounded for more than a year: A recession is going to hit the United States. If not this quarter, then by next quarter. Or the quarter after that. Or maybe next year. So is a recession still in sight? The latest signs suggest maybe not.”
“FTX Begins Talks On Reboot Amid Regulatory Crackdown On Crypto Exchanges” (Wall Street Journal). “FTX is moving ahead with plans to restart its flagship international cryptocurrency exchange, an effort that will face major challenges as regulators ratchet up their oversight of the industry and the company works its way through bankruptcy proceedings.”
“How Plastics are Poisoning Us” (The New Yorker). “How worried should we be about what’s become known as ‘the plastic pollution crisis’? And what can be done about it? These questions lie at the heart of several recent books that take up what one author calls ‘the plastic trap.’”
“Scared Tech Workers Are Scrambling To Reinvent Themselves As AI Experts” (Vox). “Big tech companies are scouting AI talent from universities, even while rescinding offers for non-AI talent, says Zuhayeer Musa, co-founder of Levels.fyi, which also helps candidates negotiate offers. Those companies are also trying their best to hold on to the talent they have, offering key AI engineers multimillion-dollar retention bonuses lest they leave for more exciting opportunities at other firms, especially smaller ones where the work might be more interesting and the potential for growth, both financial and technical, higher. ‘It’s kind of a bonanza,’ Musa said. ‘We’re seeing people go from everywhere to everywhere.’”
“Airline Delays And Cancellations Are Bad. Ahead Of The Holiday Weekend, They’re Getting Worse” (Associated Press). “Travelers are getting hit with delays at U.S. airports again Wednesday, an ominous sign heading into the long July 4 holiday weekend, which is shaping up as the biggest test yet for airlines that are struggling to keep up with surging numbers of passengers. By late afternoon on the East Coast, about 4,800 U.S. flights had been delayed and more than 950 were canceled, according to FlightAware.”
What we’re reading (6/27)
“Harry Markowitz, Nobel-Winning Pioneer Of Modern Portfolio Theory, Dies At 95” (New York Times). “The basic concepts of portfolio theory came to Dr. Markowitz one afternoon in the library while reading an investment book by the economist John Burr Williams. ‘Williams proposed that the value of a stock should equal the present value of its future dividends,’ Dr. Markowitz wrote in a brief autobiography for the Nobel committee. ‘Since future dividends are uncertain, I interpreted Williams’s proposal to be to value a stock by its expected future dividends.’ But if investors were interested only in the expected values of securities, he figured, then that implied that the best, or maximized, portfolio would consist of the single most appealing stock. ‘This, I knew, was not the way investors did or should act,’ he concluded. ‘Investors diversify because they are concerned with risk as well as return.’”
“CFA Level I Pass Rate Rises To 39%, Closer To Historic Average” (Bloomberg). “The pass rate for the first level of the chartered financial analyst exam inched closer to its historic average, with test-takers benefiting from another period free of the pandemic-related disruptions that became common after the Covid-19 outbreak.”
“The Great Grift: More Than $200 Billion In COVID-19 Aid May Have Been Stolen, Federal Watchdog Says” (Associated Press). “More than $200 billion may have been stolen from two large COVID-19 relief initiatives, according to new estimates from a federal watchdog investigating federally funded programs that helped small businesses survive the worst public health crisis in more than a hundred years.”
“Extreme Travel Is Inspiring New Types Of Insurance” (DealBook). “The number of businesses aiming to mitigate the danger and potential emergency costs of extreme travel are starting to rise. Some offer rescue and medical evacuation from remote locations. Others are working out new types of insurance policies for pursuits like space travel.”
“UBS Preparing To Cut Over Half Of Credit Suisse Workforce” (Bloomberg). “UBS Group AG is planning to cut more than half of Credit Suisse Group AG’s 45,000-strong workforce starting next month as a result of the bank’s emergency takeover.”
July picks available soon
We’ll be publishing our Prime and Select picks for the month of July before Monday, July 3 (the first trading day of the month). As always, we’ll be measuring SPC’s performance for the month of June, as well as SPC’s cumulative performance, assuming the sale of the June picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Friday, June 30). Performance tracking for the month of July will assume the July 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 (Monday, July 3).
What we’re reading (6/22)
“Bank Of England Hikes Interest Rates To 5%, Stoking Fears Of A ‘Mortgage Bomb’” (CNN Business). “The Bank of England raised interest rates by half a percentage point Thursday, after data this week revealed surprisingly stubborn inflation. The move will pile pain on people with mortgages and put more downward pressure on house prices. The decision in favor of a 13th consecutive hike takes the main borrowing cost for commercial banks in the United Kingdom to 5%, the highest since April 2008.”
“Warner Bros. Discovery Negotiating $500 Million Deal To Sell Film And TV Music Publishing Assets” (Variety). “Warner Bros. Discovery is negotiating to sell around half of the storied Warner studio’s film and TV music-publishing assets for approximately $500 million, three sources confirm to Variety.”
“How Michael Jordan Turned $25 Million Into $3 Billion By Buying The Charlotte Hornets For Pennies On The Dollar” (Huddle Up). “Michael Jordan shocked the sports world last week when he announced that he was selling his controlling stake in the Charlotte Hornets at a $3 billion valuation. So today's newsletter breaks down how Michael Jordan acquired the team for pennies on the dollar, why they have performed so poorly on the court, and how he's set to make more money on this one deal than his 40-year partnership with Nike.”
“‘Power And Progress’ Review: Technology And The New Leviathan” (Deirdre McCloskey in the Wall Street Journal). “Since the 1920s, economists from John Maynard Keynes to Paul Samuelson to Joseph Stiglitz have been claiming, with increasing self-assurance though with surprisingly little evidence beyond the blackboard, that (1) private arrangements work poorly, (2) the state knows better, and (3) we therefore need more state. Messrs. Acemoglu and Johnson have long believed in this anti-liberal syllogism.”
“Elon Musk And Mark Zuckerberg Agree To Hold Cage Fight” (BBC News). “Two of the world's most high-profile technology billionaires - Elon Musk and Mark Zuckerberg - have agreed to fight each other in a cage match.”
What we’re reading (6/21)
“401(k) Plans Have Never Been Hotter. That’s Changing The Stock Market” (CNN Business). “Participation is likely to continue to skyrocket in 2023 as the SECURE Act 2.0 goes into effect. The bill, signed into law late last year, requires employers to automatically enroll all eligible workers into their retirement plans at a savings rate of 3% of salary.”
“Vacant Offices Are Piling Up In Silicon Valley” (Wall Street Journal). “Silicon Valley companies are dumping office space at an accelerating pace, as tech leaders such as Google and Facebook parent Meta Platforms close locations and reassess their commitments to the workplace.”
“Return To Office Enters The Desperation Phase” (New York Times). “For tens of millions of office workers, it’s been three years of scattershot plans for returning to in-person work — summoning people in, not really meaning it, everybody pretty much working wherever they pleased. Now, for the umpteenth time, businesses are ready to get serious.”
“Handouts To Corporations Don’t Create Jobs” (The Hill). “Microchip manufacturers will soon be raking in federal subsidies for building plants in the United States, but there is also a handy ploy they will use to soak up bucks from state governments: They pretend they have jobs to sell.”
“Bitcoin Rallies To Touch Highest Level Since April As Traders Get Bullish On ETF News” (CNBC). “The price of the flagship cryptocurrency touched a high of $30,749.45, its highest level since April 14, according to CoinMetrics. At 6:39 p.m. ET, the price was $29,988.46. Investors are growing bullish about the prospects of BlackRock and other major institutional names getting involved in digital assets.”
What we’re reading (6/20)
“The Hottest New Perk In Tech Is Freedom” (Vox). “[Small technology companies] are much more likely than their larger peers to allow people to work fully remotely, with 81 percent of those with fewer than 5,000 employees either allowing remote work or only having remote options, according to new data from Scoop Technologies, a software firm that builds tech to help hybrid teams coordinate and also tracks the office policies at major companies. Meanwhile, just 26 percent of companies with more than 25,000 employees are fully flexible.”
“Where Housing Prices Have Crashed And Billions In Wealth Have Vanished” (New York Times). “The pandemic’s disruptions to jobs, wages and living conditions caused a yo-yo effect in housing markets in many countries, including Sweden, Britain, Canada and Australia. Few places have experienced as wild a swing as New Zealand, which last week slipped into a recession.”
“Inside The Escalating Feud At One Of Wall Street’s Biggest Hedge Funds” (Wall Street Journal). “Over the last 22 years, John Overdeck and David Siegel built Two Sigma Investments into a $60 billion quant-trading behemoth. But behind the scenes, the billionaire co-founders have clashed over the firm’s direction, succession planning and more, people familiar with the matter said.”
“Mark Zuckerberg goes In For The Kill As Elon Musk’s Twitter Bleeds Ad Dollars” (The Telegraph). “Zuckerberg’s company is already courting celebrities and influencers to test the [new] app. Meta has been negotiating with TV host Oprah Winfrey and Tibetan religious leader the Dalai Lama to open accounts, hoping that high-profile early users can help tempt the masses to join.”
“U.S.-Funded Scientist Among Three Chinese Researchers Who Fell Ill Amid Early Covid-19 Outbreak” (Wall Street Journal). “A prominent scientist who worked on coronavirus projects funded by the U.S. government is one of three Chinese researchers who became sick with an unspecified illness during the initial outbreak of Covid-19, according to current and former U.S. officials. The identity and role of the researchers is one piece of intelligence that has been cited by proponents of the judgment that the pandemic originated with a lab leak, though the nature of their illness hasn’t been conclusively established.”
What we’re reading (6/19)
“Tech-Stock Boom Pits AI Against The Fed” (Wall Street Journal). “Investors can’t agree on whether their recent run looks like the prelude to an eventual bust—like that of the dot-com era—or the start of a more durable rally. Hype around artificial intelligence has helped drive shares of technology companies to records this year. The rally has only intensified heading into the end of the quarter.”
“Norway Proposes 40% Gender Quota For Large And Mid-Size Unlisted Firms” (Reuters). “Large and mid-size private firms in Norway must have boards comprising at least 40% women, Norway's government proposed in a bill on Monday, in a further push to break the glass ceiling preventing women from reaching top positions. The Nordic country was the first in the world to introduce a 40% gender quota on the boards of listed companies, in 2005, kick-starting an international push to force companies to have more women on boards.”
“A Tiny Activist Takes On John Malone, Cerberus, And A Cable Giant” (Institutional Investor). “Behind a pizzeria in an alley off the main drag of a New Jersey suburb, a gruff, Lenin-quoting provocateur named Kevin Rendino is plotting an assault on corporate America. His boldfaced targets: cable czar John Malone of Liberty Media Corp., leveraged buyout mogul Steve Feinberg of Cerberus Capital Management, and Charter Communications, the second-largest U.S. cable company by subscribers. Each owns preferred stock in Comscore, an advertising analytics firm, and they have been sucking it dry, Rendino says. His fund, 180 Degree Capital Corp., owns 6 percent of Comscore’s common stock — and he is incensed.”
“Fully Grown - European Vacation!” (Economic Growth Blog). “For the United States I delineated between a relatively fast-growth 20th century and a slow-growth 21st century. GDP per capita in the US grew at about 2.25% per year in the 20th, and about 1% per year in the 21st. This slowdown appeared to predate the financial crisis, starting some time around the year 2000. Does this look the same for Europe? Basically, yes.”
“Mortgages: New Squeeze On Landlords Will Hit Renters Too” (BBC). “Landlords are making their lowest profits for 16 years as interest rates rise, leading some to look to leave the sector, estate agency Savills has said. Twelve consecutive increases in the Bank of England's base rate, matched by rising mortgage costs, were putting the squeeze on landlords' income, it said.”
What we’re reading (6/18)
“Lots Of Hiring, But Not So Much Working” (Wall Street Journal). “The hiring boom obscures what looks like a contradictory economic trend: Employees are working fewer hours. The average number of hours worked a week by private-sector employees declined to 34.3 in May, below the 2019 average and down from a peak of 35 hours in January 2021, according to the Labor Department.”
“He Went After Crypto Companies. Then Someone Came After Him.” (New York Times). “Kyle Roche was a rising star in the field of cryptocurrency law — until his career imploded. Who orchestrated his downfall?”
“Odey Asset Management Suspends Further Funds After Investor Flight- Website” (Reuters). “Odey Asset Management has suspended further funds after increased investor redemptions, letters posted on the fund's website showed. The hedge fund, once run by one of Britain's best known star managers, Crispin Odey, has grappled with investor flight after the founder became the focus of sexual misconduct allegations in media reports last week.”
“The Space Industry Is Taking Off. Space Law Is Still A Mystery.” (DealBook). “Virgin Galactic, the space tourism company founded by Mr. Branson, announced on Thursday that it would launch its first commercial spaceflight this month, joining Mr. Bezos’ Blue Origin, and Mr. Musk’s SpaceX in sending ticketed passengers to space. But travel is just one emerging corner of the industry, which is mostly fueled by U.S. and international government contracts. The sector includes companies in the fields of satellites and communications, solar power, manufacturing, and even mining. One, Orbital Assembly, hopes to open a luxury extraterrestrial hotel by 2025.”
“A Sydney Home That’s Been Abandoned For 7 Years And Is Completely Covered In Vines Is Going Up For Auction At $1.7 Million, And The Agent Says It’s ‘Not Habitable.’ Check It Out.” (Insider). “Located on a quiet back street in Redfern — an inner suburb of Sydney in Australia — the abandoned property has been completely reclaimed by nature, listing photos show.”
What we’re reading (6/16)
“A Bull Or A Bear Market? It Doesn’t Matter.” (New York Times). “Instead of focusing on where stocks may be heading over the summer, consider that over periods of 20 years or longer, the stock market has always risen. But remember that it’s frequently fallen sharply from time to time within those periods.”
“Why Value Investing Works” (Morningstar). “Per the academic research, buying stocks on the cheap has flourished for as long as the data has existed. Why? The common explanation is sentiment. What is now unloved will later receive its due. True enough. Value investing certainly does benefit when the unpopular becomes popular. But that is the icing rather than the cake. The happy secret of value investing is that it can succeed even if sentiment remains unchanged.”
“Disney Finance Chief Clashed With Top Executives Before Stepping Down” (Wall Street Journal). “[Disney CFO Christine] McCarthy has clashed with Disney Chief Executive Robert Iger and other top executives over strategy, including the amount of money Disney spends on content and a recent restructuring that she felt didn’t go far enough to streamline the company, a person familiar with the matter said.”
“The Housing Market Has About 40% Fewer Homes For Sale Than Before The Pandemic, And Listings Keep Falling” (Insider). “The issue is unlikely to ease anytime soon, as the total number of homes for sale dropped 6% year over year in the four weeks leading up to June 11, the report said, marking the largest drop in 13 months. And new home listings fell 23%, the 10th consecutive month of double-digit declines, amid a slump in homebuilding.”
“The Trust Crisis” (Commentary). “We have no shortage of conflicts and challenges in 2023. But is life in the United States worse than in 1973? Item by item, no. Not even close. American troops aren’t fighting in a foreign war; Ukrainians are. (And even in 1973, a total of 68 Americans were killed in Vietnam.) The 1973 oil shock was the largest in history. In 2023, oil prices are down almost 11 percent from a year earlier. Whatever unsavory business dealings may be swirling around the Biden family, the president is not facing resignation or removal because of them. And while the crime rate has risen significantly in the past few years, the crime spike of the immediate postwar decades makes our age look paradisiacal.”
What we’re reading (6/15)
“Stocks Close At Highest Levels Since 2022” (Wall Street Journal). “Markets have been buoyant in recent weeks, with the three major U.S. stock indexes closing Thursday at their highest levels since 2022. The S&P 500 on Thursday scored its sixth straight session of gains, its longest winning streak since an eight-session run in November 2021, according to Dow Jones Market Data.”
“Artificial Intelligence Already Being Used In Transactional Drafting: An Interview With The CEO Of Spellbook” (Dealbreaker). “Professors worried that no human being would ever bother to write a term paper again. A handful of nerds went all in with the doomsaying and warned that AI has a pretty good chance of killing us all. Probably most presciently, workers, particularly those who write or code or otherwise do things that AI has already demonstrated itself to have some proficiency at, fretted about their future job security. The legal industry has been far from immune.”
“New Report Flashes A Warning Light Over 401(k) Account Balances” (CNN Business). “The average balance in employer-sponsored savings plans last year was $112,572, well below the $141,542 recorded in 2021.”
“From Quiet Desperation to Quiet Quitting: On John Kaag and Jonathan van Belle’s ‘Henry at Work’” (Los Angeles Review of Books). “Long before ‘quiet quitting’ entered the lexicon, Henry David Thoreau concluded from the shore of Walden Pond that ‘the mass of men lead lives of quiet desperation.’ His contemporaries’ desperation was but another word for their resignation: not resignation from a life of unhappy, meaningless work ‘in shops, and offices, and fields,’ but resignation to it. In going to Walden Pond, Thoreau himself did the opposite, opting out of the rat race rather than ‘practi[cing] resignation’ and ‘liv[ing] what was not life.’”
“Corporate Discount Rates” (Niels Joachim Gormsen and Kilian Huber). “Standard theory implies that the discount rates used by firms in investment decisions (i.e., their required returns to capital) determine investment and transmit financial shocks to the real economy. However, there exists little evidence on how firms’ discount rates change over time and affect investment. We construct a new global database based on manual entry from conference calls. We show that, on average, firms move their discount rates with the cost of capital, but the relation is far below the one- to-one mapping assumed by standard theory, with substantial heterogeneity across firms.”