What we’re reading (7/19)
“Homeowners Don’t Want To Sell, So The Market For Brand-New Homes Is Booming” (Wall Street Journal). “Millions of American homeowners have been reluctant to sell because they can’t afford to give up the low mortgage rates they have now. Only 1.08 million existing homes were for sale or under contract at the end of May, the lowest level for that month in National Association of Realtors data going back to 1999.”
“Netflix Just Quietly Made It A Lot More Expensive To Get Rid Of Ads” (Insider). “As of Wednesday, an Insider reporter based in New York viewed Netflix's pricing plan page and found that its ‘Basic’ option — once priced at $9.99 a month — is now unavailable to new and rejoining members in the US and UK. Those who are currently on the ‘Basic’ plan won't get kicked off until they change their plans or cancel their accounts, according to Netflix's FAQ.”
“UPS And Teamsters To Meet Next Week Ahead Of Looming Strike” (CNN Business). “Negotiations will resume next week between UPS (UPS) and the Teamsters union, which represents 340,000 UPS (UPS) workers, ahead of a looming nationwide strike. This will be the first time the two sides have met since they walked away from the negotiating table following a marathon negotiating session over the July 4 weekend.”
“Convicted Ponzi Schemer Granted Clemency By Trump Charged With New Ponzi Scheme” (CNBC). “Eli Weinstein and four accomplices are accused of overseeing a new Ponzi scheme that prosecutors say has defrauded 150 victims out of more than $35 million.”
“Wasn’t Lower Inflation Supposed To Be Impossible Without Higher Unemployment?” (Cato Institute). “[T]he Fed and academic economists are not easily dissuaded by troublesome facts. They just keep on searching for new ways of explaining why the theory is still right, but the world has gone wrong.”
What we’re reading (7/18)
“Wall Street Can’t Shake Off Investment-Banking Slump” (Wall Street Journal). “The picture for Wall Street businesses is more complicated. A resilient U.S. economy hasn’t done much to shake the uncertainty that has kept corporate executives from taking their companies public and pursuing deals. And calmer financial markets have reined in the trading boom that had been a bright spot for the industry.”
“Meta Unveils A More Powerful A.I. And Isn’t Fretting Over Who Uses It” (New York Times). “Mr. Zuckerberg, the chief executive of Meta, said on Tuesday that he planned to provide the code behind the company’s latest and most advanced A.I. technology to developers and software enthusiasts around the world free of charge.”
“The Dirty Little Secret That Could Bring Down Big Tech” (Insider). “Let's be clear here: This isn't the traditional capitalist story of ‘you win some, you lose some.’ The point isn't that venture capitalists sometimes invest in companies that don’t make their money back. The point is that the entire model deployed by VCs is to profit by disrupting the marketplace with predatory pricing, and leave the losses to the suckers who buy into the IPO. A company that engages in predatory pricing and its late-stage investors might not recoup, but the venture investors do.”
“US Startups Are Having A Bad Year. Relief Isn’t Coming” (CNN Business). “Venture capital funding for startups across the globe halved in the first six months of the year, according to new Pitchbook data – it would have been even worse, they said, if there hadn’t been a big boost in AI investment. More than 400 companies haven’t been able to raise any new money since 2021, according to Pitchbook. Meanwhile, nearly 95% of all tech startups worth more than $1 billion aren’t able to generate a profit at all. The carnage is so bad that some insiders are calling this an extinction-level event for startups.”
“You’re Going To See More AI-Written Articles Whether You Like It Or Not” (Vox). “In early July, managers at G/O media, the digital publisher that owns sites like Gizmodo, the Onion, and Jezebel, published four stories that had been almost entirely generated by AI engines. The stories — which included multiple errors and which ran without input from G/O’s editors or writers — infuriated G/O staff and generated scorn in media circles. They should get used to it.”
What we’re reading (7/16)
“A $10 Trillion Stock Market Rally Faces Crucial Test In Earnings” (Bloomberg). “S&P 500 firms are expected to post a 9% drop in profits in the second quarter, making it the worst season since 2020, according to data compiled by Bloomberg Intelligence. In Europe, it may be even worse, with a projected 12% slump. But with the bar already low — and some indicators suggesting an earnings recovery next year — strategists are split on how the market will react.”
“What Markets Are Saying About The Fight Against Inflation” (Wall Street Journal). “U.S. Treasury yields closely track investors’ expectations for interest rates and dropped sharply when bonds rallied last week after the release of lower-than-expected readings on consumer and supplier prices. Yet yields remain well above their lows for the year, suggesting many aren’t convinced that the Fed’s work is done.”
“Pay Raises Are Finally Beating Inflation After Two Years of Falling Behind” (Wall Street Journal). “Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department. That marked the second straight month of seasonally adjusted gains after two years when workers’ historically elevated raises were erased by price increases.”
“Media Titan Barry Diller Delivers Doomsday Forecast: Actor And Writer Strikes Could Lead To Hollywood’s ‘Absolute Collapse’” (Mediaite). “Appearing on CBS’ Face the Nation Sunday, Diller — the head of the media conglomerate IAC, who previously served as CEO for Paramount and 20th Century Fox — weighed in on the state of the industry amid the SAG-AFTRA and Writers Guild of America strikes. Diller called the current challenges facing the industry a ‘perfect storm.’”
“Bottlenecks: Sectoral Imbalances And The US Productivity Slowdown” (Acemoglu, Autor, & Patterson, NBER Working Paper). “Despite the rapid pace of innovation in information and communications technologies (ICT) and electronics, aggregate US productivity growth has been disappointing since the 1970s. We propose and empirically explore the hypothesis that slow growth stems in part from an unbalanced sectoral distribution of innovation over the last several decades. Because an industry's success in innovation depends on complementary innovations among its input suppliers, rapid productivity growth that is concentrated in a subset of sectors may create bottlenecks and consequently fail to translate into commensurate aggregate productivity gains.”
What we’re reading (7/15)
“Economists Are Cutting Back Their Recession Expectations” (Wall Street Journal). “Economists are dialing back recession risks. Easing inflation, a still-strong labor market and economic resilience led business and academic economists polled by The Wall Street Journal to lower the probability of a recession in the next 12 months to 54% from 61% in the prior two surveys.”
“Why Deep-Sea Mining Is The Next Battleground In The Energy Transition” (DealBook). “Surging demand for metals used in electric vehicle batteries has kicked off an international race to mine the deep seas. And there are no rules. On Sunday, the International Seabed Authority missed an important deadline to establish a regulatory framework, which means that companies can now apply for licenses before rules are final. Representatives from the agency, which is made up of 167 member states and the European Union, have gathered in Jamaica for two weeks to debate what should happen next.”
“A 10-Day UPS Strike Could Be The Costliest In US History” (CNN Business). “A 10-day UPS strike could cost the US economy $7.1 billion. That could make it the costliest work stoppage ever in US history, according to an estimate from a Michigan economic research firm [Anderson Economic Group] that studies the costs of labor disruptions.”
“Slow Burn Minsky Moments” (GMO). “We seem to live in an era of rolling financial crisis. I suspect this is the result of a massive build-up of private sector debt. Sometimes, these build-ups are accompanied by very high rates of credit growth, giving rise to a credit bubble. On other occasions, these build-ups sit simmering in the background, largely unnoticed until the proverbial s**t hits the fan, when they suddenly act as an amplifier causing causing a much steeper decline than would otherwise have been the case…Sadly, most markets appear to carry the fingerprint of these moments today.”
“Bond Market Outlook: Valuations Suggest Potential for Equity-Like Returns With Less Risk” (PIMCO). “High-quality fixed income assets may offer the best return potential in more than a decade along with diversification benefits as a likely recession approaches.”
What we’re reading (7/14)
“It’s Been A Good Stretch For The Markets, But Not As Good As It Looks” (New York Times). “Stock and bond investors in mutual funds and E.T.F.s. had positive returns on average for the second quarter, which ended on June 30, as well as the first quarter, which ended on March 31. Yet the average 12-month returns for stocks and bonds shifted radically from quarter to quarter, mainly because of what happened in 2022, not this year.”
“Yes, A Recession Is Still A Possibility” (Manhattan Institute). “Predictions of a ‘soft landing’ seem both premature and hard to square with some of the data.”
“Bank Results Reveal Stark Divide As Industry Recovers From Turmoil” (Yahoo! Finance). “JPMorgan and Wells Fargo showed that some giants can continue to make lots of money from consumer loans even as industry deposit costs rise while leaning on their sprawling franchises to generate additional revenue. What Citigroup revealed is that a number of problems continue to plague even the biggest institutions, especially those that rely heavily on dealmaking and trading.”
“Zuckerberg Channeled ‘OG Mark’ To Fast-Track Secret Effort That Became Threads” (Wall Street Journal). “The outward triumphalism mirrors Zuckerberg’s attitude behind the scenes, people familiar with the matter said. He has become more emboldened, acting intentionally and doing so in a cutthroat manner akin to that of his early years running Facebook, or as some have described it, a return to ‘OG Mark.’”
“The Barbie Merch Explosion Is ‘Heaven’ For Collectors Of The Iconic Doll” (Washington Post). “‘This film is like Jesus coming to Earth or something, the Second Coming,’ said Simon Farnworth, a 53-year-old Barbie collector from outside London who sells new and vintage dolls on his website, Simon’s Collectibles. ‘It’s the most exciting thing to ever happen to a Barbie collector, I think.’”
What we’re reading (7/13)
“Everything’s Coming Up Soft Landing” (New York Times). “Why have things gone so well? Part of the answer is probably that until recently, disruptions related to the pandemic were still driving some inflation but those disruptions have been fading away. Part of the answer may also be that when the economy is running hot, policies that cool it down — such as the Fed’s recent rate hikes — may reduce inflation without much adverse effect on employment.”
“As Inflation Goes Down, Soft Landing Odds Improve” (Wall Street Journal). “More encouraging is that underlying inflation has edged lower in recent months, even though the labor market has yet to weaken significantly. This suggests the odds of a soft landing, in which inflation returns close to the Fed’s 2% target without a recession, are improving.”
“‘Nobody Was There’: What’s Behind The Summer Slump At Disney World And Universal Orlando” (CNN Business). “Wait times for rides and attractions at both resorts have shortened, according to analysts who track theme park attendance. Videos on social media also show park attendees remarking on thinner crowds. The reasons behind the slowdown are hard to pin down, but travel experts point to extreme weather and heat in Florida, a waning post-pandemic travel boom and a tense political climate in Florida that has prompted travel warnings from some groups.”
“Fed’s Bullard, Influential Voice On Rates, To Leave for Academia” (Bloomberg). “Federal Reserve Bank of St. Louis President James Bullard, an influential voice who called for aggressive interest-rate hikes to fight the recent inflation surge, resigned after 15 years in the position to become dean of a university business school [Purdue].”
“Actors Union Will Join Writers On Strike, Shutting Down Hollywood” (CNBC). “Hollywood actors are officially headed to the picket line. Unable to reach a deal with producers, members of The Screen Actors Guild - American Federation of Television and Radio Artists will join up with more than 11,000 already striking film and television writers starting at midnight.”
What we’re reading (7/12)
“Inflation Rose Just 0.2% In June, Less Than Expected As Consumers Get A Break From Price Increases” (CNBC). “Inflation fell to its lowest annual rate in more than two years during June, the product both of some deceleration in costs and easy comparisons against a time when price increases were running at a more than 40-year high. The consumer price index, which measures inflation, increased 3% from a year ago, which is the lowest level since March 2021. On a monthly basis, the index, which measures a broad swath of prices for goods and services, rose 0.2%.”
“US Stocks Climb As Traders Hope Cooler June Inflation Means End To Fed Tightening” (Insider). “Stocks climbed on Wednesday as traders hoped that cooling inflation will put an end to the Federal Reserve's rate hikes soon…Investors are still widely expecting the Fed to hike rates 25 basis points at its July policy meeting, which would lift the fed funds rate target to 5.25%-5.5%. Another rate hike remains on the table, but bets that the Fed will pause in September rose to 82% from 72% on Tuesday.”
“Wall Street’s Recession Warning Is Flashing. Some Wonder If It’s Wrong.” (New York Times). “The yield curve…has continued to reverberate in 2023 and is now sending its strongest warning since the early 1980s of a coming downturn. But even though the alarms have been getting louder, the stock market has rallied and the economy has remained resilient, prompting some analysts and investors to rethink its predictive power.”
“Q And A With Robert McCauley On Manias, Panics, And Crashes: A History Of Financial Crises” (London School of Economics). “There is no place in standard economic reasoning for manias. Ben Bernanke discounted [Charles] Kindleberger’s views as depending on human irrationality, but Kindleberger made it very clear that individual rationality can lead to collectively irrational results.”
“U.S. Takes Third Shot At Shoring Up Money-Market Funds” (Wall Street Journal). “The Securities and Exchange Commission voted 3-2 Wednesday to change the rules governing money-market funds, which the Federal Reserve had to backstop with emergency lending facilities in 2008 and 2020. Two previous overhauls by the SEC failed to stop investors from fleeing certain funds en masse when markets faced extreme stress.”
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).