August picks available now
The new Prime and Select picks for August are available starting now, based on a model run put through today (July 30). As a note, I will be measuring the performance on these picks from the first trading day of the month, Tuesday, August 1, 2023 (at the mid-spread open price) through the last trading day of the month, Thursday, August 31, 2023 (at the mid-spread closing price).
What we’re reading (7/28)
“Fed’s Powell Talks Tough After Rate Hike, But A Pause Seen Likely From Here” (Morningstar). “We believe more positive news about inflation will come in upcoming reports. Thus, despite the Fed’s latest projections showing one more rate rise in 2023, we think it’s done with hiking. Federal-funds futures markets agree with this assessment.”
“What Happened To Japan?” (Paul Krugman, New York Times). “Here’s the story you may have heard: In the late 1980s Japan experienced a monstrous stock and real estate bubble, which eventually burst. Even now, the Nikkei stock average is significantly below the peak it reached in 1989. When the bubble burst, it left behind troubled banks and an overhang of corporate debt, which led to a generation of economic stagnation. There’s some truth to aspects of this story, but it misses the most important factor in Japan’s relative decline: demography. Thanks to low fertility and unwillingness to accept immigrants, Japan’s working-age population has been declining quite rapidly since the mid-1990s. The only way Japan could have avoided a relative decline in the size of its economy would have been to achieve much faster growth in output per worker than other major economies, which it didn’t.”
“Bernanke Tapped To Find Out Why U.K. Central Bank Misjudged Inflation” (Wall Street Journal). “The Bank of England has named Ben Bernanke, a former chair of the Federal Reserve, to review its economic forecasting record, one of the first steps taken by a leading central bank to understand why they underestimated a surge in prices that began more than two years ago and dented living standards.”
“Barclays Can’t Count On Underpaying Customers To Keep Itself Afloat Forever” (Dealbreaker). “For a while, soaring interest rates were just the tonic C.S. Venkatakrishnan needed to hide Barclays’ many, many ills while he tried to figure out a longer-term cure. They helped paper over the misery at its investment bank while also offering a nice fillip to its retail bank. Venkat’s still working on a treatment plan, but the central bank snake oil is wearing off: Not only has the benefit for the benighted I-bank peaked, but those fat net interest margins are starting to slim down.”
“The Man Suing Buffalo Wild Wings Over Their Boneless Wings Really Being Chicken Nuggets Asked A Judge Not To Throw Out The Case And Reward The Company’s ‘Hubris’” (Insider). “Buffalo Wings Wings doesn't ‘give a s---’ that people say its boneless wings aren't really wings. The man suing the restaurant — because he thinks its boneless wings are basically chicken nuggets — says that's enough reason for a judge to hear him out. Aimen Halim filed a class-action lawsuit against Buffalo Wild Wings in March, saying the company’s marketing of boneless wings is misleading because they are ‘more akin in composition to a chicken nugget rather than a chicken wing.’”
What we’re reading (7/27)
“The Dow Sinks, Snapping Its Longest Run Since 1987” (CNN Business). “The Dow slipped on Thursday, snapping a 13-day winning streak. The blue-chip index fell 237 points after being on track to close higher for a 14th consecutive session. That would have marked the Dow’s longest run of consecutive gains since May 1897. If the Dow had closed higher Thursday and Friday, it would have notched 15 days of gains, its longest daily winning streak ever.”
“Hedge Funds That Sold Alphabet Miss Out On Huge Gains” (Institutional Investor). “The Google bulls are winning — at least for now. Shares of the search giant’s parent Alphabet surged about 6 percent Wednesday, after the company beat second-quarter earnings forecasts and reported strong revenues from its cloud business. The stock is now up more than 50 percent for the year.”
“Commercial Real Estate Is In Trouble, But Not For The Reason You Think” (Morningstar). “The long, slow metamorphosis happening in the office segment of the commercial real estate market is soaking up oxygen from another story that’s rapidly unfolding in commercial real estate markets. Remember those other categories? The biggest one, beating office by a few hundred billion dollars, is multifamily residential. Multifamily residential buildings are typically apartment complexes that are owned by commercial landlords. Real estate loans in this area are looking especially wobbly, for three primary reasons.”
“Sequoia Capital Slashes Crypto Fund As It Downsizes Amid Startup Crunch” (Wall Street Journal). “Sequoia Capital pared back the size of two major venture funds, including its cryptocurrency fund, as part of a dramatic downsizing the storied venture firm is undertaking amid a broad startup downturn. Sequoia cut the size of its cryptocurrency fund to $200 million from $585 million, according to people familiar with the matter. It also slashed the size of its so-called ecosystem fund, which invests in other venture funds, to $450 million from $900 million, the people said.”
“One Family Pocketed $7.6 Million By Taking Cans And Bottles From Arizona And Recycling Them In California. That’s Fraud, Prosecutors Say.” (Insider). A clever example of regulatory arbitrage. “In a felony complaint filed this month, state prosecutors charged eight family members in Riverside County with defrauding the state by importing used bottles and cans from Arizona — some 178 tons in 8 months — and recycling them in California.”
What we’re reading (7/26)
“Federal Reserve Raises Interest Rates To 22-Year High” (Wall Street Journal). “Fed Chair Jerome Powell said it was too soon to tell whether the hike would conclude a series of increases aimed at cooling the economy and bringing down inflation. The central bank would decide whether to keep lifting rates based on how the economy fares in the months ahead, ‘with a particular focus on making progress on inflation,’ he said at a news conference.”
“Dow Rises For A 13th Straight Day, Posting Its Best Winning Streak Since 1987” (CNBC). “The Federal Reserve raised rates to their highest level in more than 22 years after passing through a much-anticipated quarter point hike at the conclusion of its meeting. However, Treasury yields slid after Fed Chief Jerome Powell suggested the central bank could pause again here.”
“A UPS Strike Would Have Been Worse Than You Think” (Vox). “Our reliance on delivery gave the Teamsters union a lot more leverage in UPS negotiations.”
“Hollywood's Wealth Disparity By The Numbers” (The Week). “Disney CEO Bob Iger made headlines after saying the demands of the strike were ‘unrealistic,’ resulting in significant backlash. In 2022, his contract gave him the possibility of earning up to $27 million with bonuses, according to an SEC disclosure. While this makes him one of the highest-paid Hollywood executives, Iger looks primed to make even more: He re-upped with Disney earlier this month, and could make ‘$31 million annually under the new terms, depending on his performance and the company's stock price,’ the Observer reported.”
“Welcome to Forked Lightning” (David Deming). “Do rich kids apply to Ivy-Plus colleges at higher rates? Are they admitted at higher rates? Or once admitted, are they more likely to accept the offer, perhaps because they don’t need financial aid? The answer is yes to all three, but it’s mostly admissions. We [Chetty, Deming, and Friedman] estimate that about 2/3 of the ‘extra’ rich kids at Ivy-Plus colleges are there because of preferential admissions practices.”
August picks available soon
I’ll be publishing the Prime and Select picks for the month of August before Tuesday, August 1 (the first trading day of the month). As always, SPC’s performance measurement for the month of July, as well as SPC’s cumulative performance, will assume the sale of the July picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Monday, July 31). Performance tracking for the month of August will assume the August picks are bought at the open price (at the mid-point of the opening bid and ask prices) on the first trading day of the month (Tuesday, August 1).
What we’re reading (7/24)
“Dan Och Finally Kills The Hedge Fund He Founded” (Dealbreaker). “In spite of indications that Och had perhaps thought better of obliterating the creation that still houses a substantial chunk of his fortune, it turns out that a billionaire scorned will not be denied his vengeance, whatever the cost.”
“Buyout Barons Feast On Excesses Of Last Boom” (Reuters). “The interest rate on high-yield loans to large borrowers from banks has roughly doubled to 10% since late 2021, reckons investment bank Configure Partners, while private lenders now charge about 12%. That’s a problem for corporate matchmakers. Corporate debt usually features change-of-control provisions that require it be paid off if the borrower changes hands. That forces buyers to refinance old cheap loans with new expensive ones.”
“The Markets Are Counting On The Fed To Solve A Tricky Puzzle” (New York Times). “The majority opinion on Wall Street is still that there will be a recession in the next 12 months, a Wall Street Journal survey this month showed. But because of the onslaught of data indicating that the economy remains in growth mode, many economists are lowering the odds of a recession happening, and expect that if one occurs, it will be mild.”
“Why The Fed Isn’t Ready To Declare Victory On Inflation” (Wall Street Journal). “Some Fed policy makers and economists are concerned that the easing in inflation will be temporary. They see inflation’s slowdown as long overdue after the fading of pandemic-related shocks that pushed up rents and the prices of transportation and cars. And they worry underlying price pressures could persist, requiring the Fed to lift rates higher and hold them there for longer.”
“‘Barbenheimer’s’ $246 Million Weekend Joins ‘Star Wars’ And ‘Avengers’ As One Of The Biggest Openings Ever” (CNBC). “When forecasting for the two movies first started, experts predicted that ‘Barbie’ would have an opening weekend in the $50 million to $60 million range, while ‘Oppenheimer’ looked poised to sell between $30 million and $40 million worth of tickets.”
What we’re reading (7/23)
“Fed Decision, Big Tech Earnings Highlight The Busiest Week Of The Summer” (Yahoo! Finance). “More than 150 S&P 500 companies are set to report quarterly results in the week ahead, headlined by Microsoft (MSFT), Alphabet (GOOGL), and Meta (META). Amid this earnings rush, the Federal Reserve will announce its latest policy decision on Wednesday afternoon and is expected to announce another 0.25% increase in its benchmark interest rate.”
“The Crypto Craze Is Fading As Fans Embrace AI Mania Instead, 'Black Swan' Author Nassim Taleb Says” (Insider). “‘The crypto fad is starting to peter out as many of those fanciful young adults who like to play w/computers in their mothers' basements are now getting enamored with AI,’ the author of ‘The Black Swan’ tweeted on Friday.”
“A World Transformed By 5 Percentage Points” (Wall Street Journal). “Interest rates shape the world. The Federal Reserve is expected to raise them again this week, extending a campaign with globe-spanning consequences.”
“Liberal Suburbs Have Their Own Border Wall” (The Atlantic). “The New York City suburb of Scarsdale, located in Westchester County, New York, is one of the country’s wealthiest communities, and its residents are reliably liberal. In 2020, three-quarters of Scarsdale voters cast ballots for Joe Biden over Donald Trump. One can safely presume that few Scarsdale residents are ardent backers of Trump’s wall on the Mexican border. But many of them support a less visible kind of wall, erected by zoning regulations that ban multifamily housing and keep non-wealthy people, many of them people of color, out of their community.”
“Beijing Unrattled Despite Weak Q2” (ThinkChina). “While China's housing market and exports are down, its consumption figures look to be improving and there are bright spots in the renewable energy and semiconductor sectors, says China research analyst Chen Long. A huge stimulus is unlikely to be in the offing, as Beijing still seems convinced that a more organic rebound, while slow and gradual, is better than a quick, policy-driven one.”
What we’re reading (7/22)
“Americans In Their Prime Are Flooding Into The Job Market” (Wall Street Journal). “Americans between 25 and 54 years of age are either employed or looking for jobs at rates not seen in two decades, a trend helping to counter the exodus of older baby boomers from the workforce. Economists define that age range as in their prime working years—when most Americans are done with their formal education, aren’t ready to retire and tend to be most attached to the labor force.”
“American Airlines Boosts Pilot Contract Offer By $1 Billion After United Deal” (CNBC). “The new offer from American Airlines would bring the four-year offer’s value to around $9 billion, and match United pay rates, backpay and other benefits such as sick time and life insurance, CEO Robert Isom said in a message to pilots on Friday.”
“Even Congress Thinks Its Members Should Stop Playing The Stock Market” (Vox). “The vast majority of voters do not want members of Congress to trade stocks. Plenty of members of Congress say they don’t think they and their colleagues should be playing the stock market either. And so a piece of bipartisan legislation has just landed that would accomplish just that. How this bill will fare, like multiple others before it, is unclear.”
“One Of Wall Street’s Favorite Chipmakers Has Seen Its Value Tumble As Worker Shortages And Delays Dent Investor Hype” (Insider). “While Nvidia has outperformed just about every major tech stock this year with a more than 200% surge, chipmakers generally have been stuck in a malaise: Demand is waning, personal computer and smart phone sales are down, and the outlook for a rebound is bleak amid a muddled global economic picture.”
“‘Barbie,’ ‘Oppenheimer’ Doubleheader ‘Pinnacle Of The Year’ As Box Office Lags 2019” (Yahoo! Finance). “Current year-to-date box office levels, although up 12% compared to last year, are still down roughly 20% versus 2019, according to Comscore data. That could change heading into the back half of the year.”
What we’re reading (7/21)
“Dow Edges Higher, Its 10th Gain In A Row” (Wall Street Journal). “The Dow Jones Industrial Average eked out its tenth-straight daily gain Friday, overcoming an earnings-day selloff in American Express shares with gains from a range of blue-chips, including Intel, Procter & Gamble, Nike and Chevron.”
“UPS Strike Would Trigger Pandemic-Era Supply Chain Issues, Expert Says” (The Hill). “As talks between UPS and the union that represents more than 300,000 delivery drivers break down, a strike this summer is looking more likely. That could impact 25 to 30 percent of parcels and packages shipped in the U.S. The Teamsters represent 340,000 UPS workers. If a strike does happen, it would be the first since a 15-day walkout by 185,000 workers crippled the company a quarter century ago.”
“Q&A: How This Stanford Freshman Brought Down The President Of The University” (Los Angeles Times). “Rumors of altered images in some of the research papers published by Stanford University President Marc Tessier-Lavigne had circulated since 2015. But the allegations involving the neuroscientist got little attention beyond the niche scientific forum where they first appeared — until Stanford freshman Theo Baker decided to take a closer look.”
“This Summer’s Biggest Hit? The Barbie Marketing Team.” (Vox). “A kind of mob hysteria has taken hold of us in the past few months: the people are demanding cinematic Barbie — the version artfully masterminded by an esteemed auteur director, starring two beautiful and seriously regarded actors. But of course, Barbie fever is in many ways manufactured mania, with the backing of a Hollywood blockbuster marketing budget. Barbie’s total marketing spend hasn’t been confirmed, but it’s not uncommon for big studios to fork over $100 million or more on major releases (according to Deadline, global marketing for The Little Mermaid cost around $140 million.)”
“The Quickest Path To Becoming A Billionaire” (RealClear Markets). “Regarding the evidence part, or the assertion that entrepreneurs lack tangible evidence supporting their vision, it’s a truism that’s not stated enough. If there were evidence backing the passion of entrepreneurs, they wouldn’t be entrepreneurs. That’s the case because existing, well-capitalized businesses would already be in the process of expanding with the tangible evidence top of mind.”
What we’re reading (7/20)
“Sergey Brin Is Back In The Trenches At Google” (Wall Street Journal). “The multibillionaire has been visiting the tech giant’s Mountain View, Calif., offices in recent months generally three to four days a week, working alongside researchers as they push to develop the company’s next large artificial-intelligence system.”
“It’s The Summer Of Private Credit — And Goldman Sachs Wants In” (Institutional Investor). “After a ‘lost decade’ for private credit, rising interest rates have made the asset class attractive again. Yields have increased from 5 to 8 percent to well more than 10 percent and creditors have the upper hand in negotiations, according to BCA Research, a sister company of Institutional Investor.”
“Consumers Are Slowing Their Spending” (LPL Research). “The June Retail Sales report reveals a mixed story of consumer spending in the United States. In June, retail sales rose 0.2%, a bit softer than the previous revised gain of 0.5%. This slight slowdown indicates a tired consumer and raises questions about the strength of future spending.”
“Google Tests A.I. Tool That Is Able To Write News Articles” (New York Times). “Google is testing a product that uses artificial intelligence technology to produce news stories, pitching it to news organizations including The New York Times, The Washington Post and The Wall Street Journal’s owner, News Corp, according to three people familiar with the matter. The tool, known internally by the working title Genesis, can take in information — details of current events, for example — and generate news copy, the people said, speaking on the condition of anonymity to discuss the product.”
“The Hottest New Job Is “Head Of AI” And Nobody Knows What They Do” (Vox). “Regardless of where the head of AI sits within an organization, the fact remains that it’s a new frontier that will likely change a lot as the technology and our understanding of it develop. And like with any new technology, there’s going to be a mix of genuine innovation and genuine swindling.”
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.”