What we’re reading (4/22)
“Stocks Regain Footing After Brutal Week” (Wall Street Journal). “Stocks jumped on Monday, bouncing back after last week’s dismal performance. The S&P 500 gained 0.9%, ending a six-day streak of losses, with each of the benchmark index’s 11 sectors finishing the day in the green. The tech-heavy Nasdaq Composite advanced 1.1% after falling 5.5% last week. The blue-chip Dow Jones Industrial Average added 0.7%, or about 254 points.”
“Is There Enough Text To Feed The AI Beast?” (Semafor). “The amount of data on the internet is growing at a pace of about 7% per year, Epoch’s [an AI forecasting research institute] director, Jaime Sevilla, said, while the amount of data AI is being trained on is increasing at 200% per year. If the biggest models have ingested most of the content already, there won’t be much new information for them to learn from.”
“Are There Really More Things Going Wrong On Airplanes?” (Vox). “[W]hat’s actually happening? Are more planes having incidents than ever before? Or are we just hearing about more incidents? It’s mostly the latter. Minor aviation incidents with few or no injuries — like those listed above — happen constantly. They just don’t make the news. The National Transportation Safety Board (NTSB), which investigates aviation incidents and accidents, lists 12 incidents on commercial aircraft in the United States so far this year. Last year, during the same time period, there were 13 such incidents.”
“Luxury Real Estate Prices Just Hit An All-Time Record” (CNBC). “Overall real estate sales fell 4% nationwide in the first quarter, according to Redfin. Yet, luxury real estate sales increased more than 2%, posting their best year-over-year gains in three years, according to Redfin.”
“Home Renovations Are Booming Thanks To High Rates” (Bloomberg). “In the early days of the pandemic, rock-bottom loan rates fueled a rise in US home sales as well as renovation spending. Today, as rates have shot up, more homeowners are staying put, but they’re still investing at near-record levels in bathroom redos, landscaping upgrades and other improvements. Abbe Will, senior research associate at the Harvard Joint Center for Housing Studies, describes their mindset this way: ‘I know I’m going to be in this home for however many more years, so what can I do to make it nicer for as long as I’m here?’”
What we’re reading (4/21)
“Chipotle Keeps Raising Prices. Gym Rats And Millennials Are Still Buying Burritos.” (Wall Street Journal). “Chipotle Mexican Grill has increased prices six times since 2021. It was among the first restaurant companies to say it would boost its menu prices on delivery apps. And its prices are set to rise further in California, where roughly 400 locations are paying higher hourly wages in response to a new state law.”
“Tesla Cuts Prices In Major Markets As Sales Fall” (BBC). “Tesla has the cut its prices again in a number of major markets - including the US, China and Germany - as the electric car giant run by multi-billionaire Elon Musk faces falling sales. The move comes after it reported a sharp fall in its global vehicle deliveries in the first three months of this year. A price war has been intensifying between electric vehicle (EV) makers, with particularly fierce competition coming from Chinese firms.”
“Private Equity Finds Its Next Bet: College Admissions” (CNN Business). “It’s been a volatile few years for US college entrance exams, and the companies that run them, as universities around the country try to figure out what’s the best way to evaluate prospective students. In the midst of that turmoil, the companies (often nonprofits) that create these tests have been slammed by financial losses. Now, private equity firms are swooping in to help while taking majority stakes in exchange. That’s worrying some education advocates.”
“The Simple Macroeconomics Of AI” (Daron Acemoglu). “[This paper] establishes that, so long as AI’s microeconomic effects are driven by cost savings/productivity improvements at the task level, its macroeconomic consequences will be given by a version of Hulten’s theorem: GDP and aggregate productivity gains can be estimated by what fraction of tasks are impacted and average task-level cost savings. Using existing estimates on exposure to AI and productivity improvements at the task level, these macroeconomic effects appear nontrivial but modest[.]”
“F.T.C. Said To Consider Blocking Major Fashion Merger” (DealBook). “The F.T.C.’s five commissioners are expected to meet next week to discuss the case, a move that could precede a formal vote on whether to file a lawsuit, the people said. The people, who were not authorized to discuss the deliberations, said it was still possible that the agency could opt not to sue.”
What we’re reading (4/20)
“US House Passes $95 Billion Ukraine, Israel Aid Package, Sends To Senate” (Reuters). “The U.S. House of Representatives on Saturday with broad bipartisan support passed a $95 billion legislative package providing security assistance to Ukraine, Israel and Taiwan, over bitter objections from Republican hardliners. The legislation now proceeds to the Democratic-majority Senate, which passed a similar measure more than two months ago.”
“Big Stocks Won When Markets Rose. They Are Winning Again In The Selloff.” (Wall Street Journal). “One of the biggest concerns amid the run-up in stocks in the first three months of the year was that the rally was dominated by the biggest companies. As it sold off this month, the market became even more top heavy. Blame the Fed, and a change in how investors react to it. This isn’t how it was supposed to be. For weeks now Wall Street has been pushing the idea that the market is broadening out beyond the “Magnificent Seven” Big Tech stocks[.]”
“The Cloud Under The Sea” (The Verge). “TheThe world’s emails, TikToks, classified memos, bank transfers, satellite surveillance, and FaceTime calls travel on cables that are about as thin as a garden hose. There are about 800,000 miles of these skinny tubes crisscrossing the Earth’s oceans, representing nearly 600 different systems, according to the industry tracking organization TeleGeography. The cables are buried near shore, but for the vast majority of their length, they just sit amid the gray ooze and alien creatures of the ocean floor, the hair-thin strands of glass at their center glowing with lasers encoding the world’s data. If, hypothetically, all these cables were to simultaneously break, modern civilization would cease to function.”
“US Small-Caps Suffer Worst Run Against Larger Stocks In Over 20 Years” (Financial Times). “US small-cap stocks are suffering their worst run of performance relative to large companies in more than 20 years, highlighting the extent to which investors have chased megacap technology stocks while smaller groups are weighed down by high interest rates. The Russell 2000 index has risen 24 per cent since the beginning of 2020, lagging behind the S&P 500’s more than 60 per cent gain over the same period.”
“There’s No Easy Answer To Chinese EVs” (The Atlantic). “Chinese electric vehicles—cheap, stylish, and high quality—should be a godsend to the Biden administration, whose two biggest priorities are reducing carbon emissions quickly enough to avert a climate catastrophe and reducing consumer prices quickly enough to avert an electoral catastrophe. Instead, the White House is going out of its way to keep Chinese EVs out of the U.S. What gives? The key to understanding this seeming contradiction is something known as “the China shock.” American policy makers long considered free trade to be close to an unalloyed good. But, according to a hugely influential 2016 paper, the loosening of trade restrictions with China at the turn of the 21st century was a disaster for the American manufacturing workforce.”
What we’re reading (4/19)
Back on the saddle here after a little reprieve…
“The Alternative Truth of Private Equity and What That Means for Asset Allocation” (Institutional Investor). “Comparing the characteristics of private equity, represented by the Preqin Private Equity Index, and public equities, represented by the S&P 500 Index, reveals intriguing insights into the potential impact of performance smoothing…high autocorrelation — the notion that past returns are correlated with future returns — is relatively higher for PE broadly defined. In fact, levels of autocorrelation this high indicate that external forces have acted on the returns of this investment in an unnatural way relative to public markets. This may indicate that asset valuations are being used as a tool to reduce volatility via the smoothing process, and that skepticism of the current returns may be warranted.”
“How Not to Invest In The Bond Market” (Wall Street Journal). “In 2023, investors poured a record $54 billion into mutual funds and exchange-traded funds specializing in long-term U.S. government debt, according to Morningstar. More than half of the iShares 20+ Year Treasury Bond ETF’s $46.1 billion in total assets, for instance, came in during last year alone. Right on cue, funds of Treasury bonds maturing in 20 years or beyond have lost about 9% so far this year, handing billions of dollars in losses to their latest buyers.”
“Too Many Passive Investors? There’s No Such Thing” (Bloomberg). “Can markets still be efficient if most investors aren’t even paying attention? Surprisingly, the answer is yes.”
“Amazon Reportedly Hounded An Ex-Trader Joe’s Employee For Data On The Store’s Best-Selling Products” (Salon). “Data concerning Trader Joe’s store products is not readily accessible, according to the Journal. So in order to acquire that information, an Amazon manager repeatedly tormented the ex-Trader Joe’s employee — who remains unnamed in the report — for six months, demanding she send over store data along with emails and documents she received while working with the grocer. The employee eventually succumbed to the pressure and handed over the data along with all the requested documents to the manager.”
“How Nike Won The Battle For Caitlin Clark” (Wall Street Journal). “As Clark was cooling off from that 49-point performance [on Feb. 15, when she had broken the NCAA women’s basketball career scoring record with one of her logo shots from near midcourt], her agents were turning up the temperature on the shoe-company reps. They informed the brands courting her—which included Nike, Adidas, Under Armour and Puma—that winning her commitment would take a historic offer: $3 million a year at the very minimum.”
What we’re reading (4/8)
Good Economy, Negative Vibes: The Story Continues” (Paul Krugman, New York Times). “When it comes to economic news, we’ve had so much winning that we’ve gotten tired of winning, or at any rate blasé about it. Last week, we got another terrific employment report — job growth for 39 straight months — and it feels as if hardly anyone noticed.”
“Why 2024 Will Be A Year Of Fits And Starts For Dealmaking On Wall Street” (CNN Business). “[O]ver the past few years, mergers and acquisitions (M&A), have been hard to come by. Goldman Sachs reported substantial drops in revenue last year as 2023 had some of the lowest M&A activity in a decade. Dealmaking activity has dried up as executives have contended with recession fears, decades-high interest rates and geopolitical tensions.”
“Apple Wants To Make More Smart Home Devices — Which May Not Be Dumb” (Business Insider). “Apple isn't going to make a supercar, after all. Its Vision Pro headset is a cool curiosity searching for a killer app. And you already have an iPhone. So what's the next would-be-mind-blowing product for Tim Cook? Well, home robots, maybe. But those aren't coming out anytime soon. In the meantime we may see something decidedly less ambitious out of Apple: New iPads.”
“Blackstone Making $10 Billion Multifamily Purchase, Going On The Real Estate Offensive” (Wall Street Journal). “Blackstone is taking private Apartment Income REIT, known as AIR Communities , which owns 76 rental housing communities that are primarily in coastal markets, including Miami, Los Angeles, and Boston, the companies confirmed Monday. Blackstone plans to invest another $400 million to improve the properties, the firm said.”
“Americans Are Hooked On The Fantasy Of Financial Liberation” (Vox). “What multilevel marketing schemes are really selling.”
What we’re reading (4/7)
“The Surprising Top Mutual Fund In The First Quarter” (Wall Street Journal). “Hennessy Cornerstone Growth claims the No. 1 spot over the past year as small-to-midcap funds start to supplant the dominant large-cap growth funds.”
“Diverging Markets, Diversified Portfolios” (PIMCO). “Given today’s flat yield curves, we believe intermediate maturities can offer a sweet spot between cash, where yields are fleeting and will decline when central bank rate cuts begin, and long-duration bonds, which could face pressure from rising bond supply needed to finance growing sovereign debt.”
“The Crypto World Has A New Villain” (New York Magazine).”Billionaire Barry Silbert is accused of defrauding thousands of people. Should he get to keep their money anyway?”
“Big Tech Has A Big Cash Problem” (Wall Street Journal). “Having more money than you know what to do with used to be a high-quality problem. Now it is just a problem. The largest tech companies in the world are also the richest. Apple , Amazon, Microsoft and the parent companies of Google and Facebook now collectively sit on a little more than $570 billion in cash, short-term and long-term investments. That is more than double the collective pile of the next five richest nonfinancial companies on the S&P 500 index, according to data from S&P Global Market Intelligence.”
“Southwest Boeing 737-800 Flight From Denver Loses Engine Cover, FAA Investigating” (CNN Business). “A Houston-bound Boeing 737-800 plane operated by Southwest Airlines returned safely to Denver International Airport on Sunday after an engine cover fell off and struck the wing flap, according to the Federal Aviation Administration. The agency said it will investigate. In recorded air traffic control audio, one of the pilots said that ‘several passengers and flight attendants heard something loud hit the wing.’”
What we’re reading (4/6)
“Why The Stock Market Keeps Changing Its Story” (Wall Street Journal). “Investors love to distill the bewildering variables that move prices around into a single narrative. Once enough people agree on “what’s driving markets” then the narrative can be self-fulfilling—until of course, something interrupts the story and the narrative changes. Oil, like gold, is in the unusual position of benefiting from two competing themes, a hot economy and geopolitical threats.”
“Don’t Blame Indexing For Your Problems” (Acadian). “[A]s an empirical matter, it is possible that indexing has hurt market efficiency, but that is a statement about who’s left in the non-passive sector. Let me give you an example. Suppose there are 100 investors in a stock market. We start with zero passive investors. Now suppose that 50 of the investors decide to switch to passively holding the market. Does that make the market less efficient, crushing price discovery and paving the way for Marxism? Well, it depends on who switches. If the 50 smartest and best-informed investors switch to passive, then yes, it could make prices less informative. If the 50 craziest and least informed investors switch, then maybe market prices get more informative. What matters is who stays in the market, providing price discovery and liquidity.”
“The Perfect Heist? Inside The Seamless, Sophisticated, Stealthy L.A. Theft That Netted Up To $30 Million” (Los Angeles Times). “Officials said the burglars appeared to enter through the roof. At least one alarm was triggered during the crime, but it was not connected to local law enforcement, according to a source familiar with the investigation who was not authorized to discuss it publicly. In any case, the thieves were able to get in and out without anyone knowing. There was also a hole in the side of the building covered by a piece of plywood. A law enforcement source confirmed to The Times there was an effort to breach the side but it was not clear how that area was used in the heist.”
“U.S. And China To Hold Talks On ‘Balanced Growth’ Amid Overcapacity Concerns, Yellen Says” (CNBC). “U.S. Treasury Secretary Janet Yellen said on Saturday that she and Chinese Vice Premier He Lifeng agreed to launch exchanges on “balanced” economic growth, an effort to address U.S. concerns about China’s excess manufacturing capacity. After two days of economic talks in China’s southern export hub of Guangzhou, Yellen said she and He also agreed to start a forum to cooperate on anti-money laundering efforts in their respective financial systems.”
“New York City’s New Gilded Age” (Business Insider). “The bars and restaurants that put the glint on New York City never stopped partying. While the rest of the country — businesses, investors, economists, regular people — misspent 2023 in a state of anxiety, waiting for a recession that never came, the bastions of New York City's dining elite came out of the pandemic louder, prouder, and more extravagant than ever. Here, it's ancient Rome. And if New York City has a legalized form of popular bloodsport, it's the restaurant business.”
What we’re reading (4/4)
“This Small-Cap Stock Index Has Some Jumbo-Size Tenants” (Wall Street Journal). “Super Micro, a server maker known more commonly by its brand name Supermicro, is up 237% this year as demand surges for servers that power generative AI capabilities in data centers. MicroStrategy, meanwhile, has advanced 156% as the value of its cryptocurrency holdings has soared. Those returns have dwarfed hot stocks such as Nvidia, which has gained 73%. The ‘Micro’ stocks, which are now the two largest in the small-cap stock index, have a combined market value of $84 billion, including $57 billion added this year. Together, they accounted for more than a third of the Russell 2000’s 5.2% return in the first quarter, according to data from LSEG.”
“Did One Guy Just Stop A Huge Cyberattack?” (New York Times). “The internet, as anyone who works deep in its trenches will tell you, is not a smooth, well-oiled machine. It’s a messy patchwork that has been assembled over decades, and is held together with the digital equivalent of Scotch tape and bubble gum. Much of it relies on open-source software that is thanklessly maintained by a small army of volunteer programmers who fix the bugs, patch the holes and ensure the whole rickety contraption, which is responsible for trillions of dollars in global G.D.P., keeps chugging along. Last week, one of those programmers may have saved the internet from huge trouble. His name is Andres Freund. He’s a 38-year-old software engineer who lives in San Francisco and works at Microsoft.”
“A Million Simulations Predict A Dire Ending To America’s Debt Problem” (creditnews). “Bloomberg's research arm ran a million forecast simulations to determine just how fragile the U.S. debt outlook is in light of the federal government’s continued spending. The results are alarming, to say the least. In 88% of the forecast simulations, America’s debt-to-GDP ratio will increase over the next decade—putting the country on an unsustainable path.”
“Women’s Share Of Executive Jobs Falls For First Time In Years, Study Finds” (Washington Post). “Female executives lost roughly 60 ‘C-suite’ roles last year, a reversal after several years of slow but persistent growth, according to S&P Global Market Intelligence. Women now claim 11.8 percent of 15,000 chief executives, financial officers and other top roles at publicly traded U.S. companies, down from 12.2 percent the previous year, S&P said. It’s the first decline in that percentage since S&P started tracking this data in 2006.”
“The Costco Shoppers Putting $2,000 Gold Bars In Their Carts” (Wall Street Journal). “Americans can’t get enough gold. Costco, which started offering gold bars last year online and in a few stores, has been selling out within hours. Consumers rated gold as a better investment than stocks and mutual funds in 2023 for the first time in a decade, according to a Gallup poll. The price has been hitting record highs.”
What we’re reading (4/3)
“Fed’s Powell Emphasizes Need For More Evidence That Inflation Is Easing Before Cutting Rates” (CNBC). “Federal Reserve Chairman Jerome Powell said Wednesday it will take a while for policymakers to evaluate the current state of inflation, keeping the timing of potential interest rate cuts uncertain…‘On inflation, it is too soon to say whether the recent readings represent more than just a bump,’ Powell said in remarks ahead of a question-and-answer session at Stanford University.”
“What’s Happening With The Famed Tiger Hedge Funds?” (Institutional Investor). “The famed Tiger hedge fund crowd may be losing its cachet. Despite posting strong gains in 2023, several of the most high-profile firms continued to see their total assets decline last year, or at a slower rate than their recent performance would indicate.”
“The Dismantling Of GE, Once America’s Iconic ‘Everything Company,’ Is Now Complete” (CNN Business). “With Tuesday’s split into two companies, the break up of the once mighty industrial icon is complete. The company was founded by Thomas Edison in 1892 and built into the world’s largest and most valuable company by the once legendary, but now oft-criticized CEO Jack Welch. But, during this century, the company became a struggling, bloated conglomerate, weighed down by poorly timed deals that left it with unaffordable levels of debt.”
“Paramount Enters Exclusive Merger Talks With Skydance, Spurning $26 Billion Offer From Apollo” (Wall Street Journal). “Members of Paramount Global’s board agreed to enter exclusive merger discussions with Skydance, favoring it over a recent $26 billion all-cash offer from private-equity firm Apollo Global Management. The move means the entertainment conglomerate is putting on pause any conversations with other bidders for 30 days while it tries to work out a deal with Skydance, a production company led by David Ellison, people familiar with the matter said.”
“What Makes Housing So Expensive?” (Construction Physics). “People concerned about building more housing are right to pay attention to zoning and land use rules: over 100 million Americans live in places where most of the cost of residential property comes from the land itself. But they should not neglect the physical costs of building homes, which are overall more important. Unfortunately, as we’ll see, reducing these physical costs is far from straightforward.”
What we’re reading (4/2)
“The New Magic Number For Retirement Is $1.46 Million. Here’s What It Tells Us.” (Wall Street Journal). “It would take $1.46 million to retire comfortably, according to a recent survey of 4,588 adults released Tuesday by financial-services company Northwestern Mutual. That is up from $1.27 million a year ago. And over $1 million more than the average survey participant’s nest egg.”
“Cognitive Dissonance” (Cliff Asness, AQR). “Here are a few things I would’ve thought were hard for investors to believe simultaneously. I would’ve been wrong…”
“Regulators Force Another Microsoft Split” (DealBook). “Microsoft is separating Teams, its popular video and chat app, from its Office software suite in markets around the world, broadening a split that began in the European Union last fall. It appears to be the latest effort by the software giant to head off investigations by global antitrust enforcers as regulators examine the power of Big Tech.”
“Why Is There So Much Lead In American Food?” (Vox). “In 2024, one of the most potent neurotoxins known to humanity persists all over the world as a public health threat. For the second time in six months, lead contamination in food products has put public health authorities on high alert in the wealthiest nation in the world. Last fall, contaminated cinnamon-applesauce pouches caused dozens of lead poisoning cases across the US, eventually prompting recalls in November. And in March, the federal government announced that some ground cinnamon products also contained slightly elevated levels of lead and advised customers not to buy them.”
“LA’s Luxury House Sales Plummet 70 PERCENT In The First Year Since Its Hated ‘Mansion Tax’ Was Brought In As Millionaires Chose To Live Outside The City In Beverly Hills, Malibu And Santa Monica Instead” (Daily Mail). “LA's Housing Department has generated $215 million from the tax over the past year - a disappointing sum compared with the $900 million it was predicted to raise. The city has defended the policy as something which will take time to gain traction, saying income from the tax snowballed toward the end of the first year.”
March performance update
Here with a March performance update. The key numbers for the month are:
Prime: +8.52%
Select: +6.45%
SPY ETF: +2.77%
Bogleheads Portfolio (20% BND, 80% VTI): +2.36%
It was a fantastic month for SPC’s strategies. Prime and Select both produced monthly returns roughly commensurate with average historical annual returns for the market as a whole, and did that, notably, by indexing on relatively boring industrial companies amid a lot of continued hype of AI in the technology sector. Of course that wasn’t deliberate, that is just what the value ratios SPC’s models follow said to do. In particular, Prime and Select both had unusually large weights on oil and gas, and these were some of the biggest winners in the month across the two strategies. Within Prime, Valero, Phillips 66, and Marathon were up roughly 20 percent, 14 percent, and 18 percent, respectively (outside of oil and gas, but still in the “boring industrial” category, GM was also up 11 percent). Within Select, EOG Resources and Pioneer Natural Resources were up 10 percent and 12 percent respectively (homebuilders in Select also did well).
Stoney Point Total Performance History
April picks available now
The new Prime and Select picks for April are available starting now, based on a model run put through Today (March 31). As a note, I will be measuring the performance on these picks from the first trading day of the month, Monday, April 1, 2024 (at the mid-spread open price) through the last trading day of the month, Tuesday, April 30, 2024 (at the mid-spread closing price).
April picks available soon
I’ll be publishing the Prime and Select picks for the month of April before Monday, April 1 (the first trading day of the month). As always, SPC’s performance measurement for the month of March, as well as SPC’s cumulative performance, will assume the sale of the March picks at the closing price (at the mid-point of the closing bid and ask prices) on the last trading day of the month (Thursday, March 28). Performance tracking for the month of April will assume the April 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, April 1).
Editorial Note: this page was corrected on 3/29/24. Previously, this page indicated that the last trading day of March 2024 would be Friday, March 29; however, U.S. markets are closed on Friday, March 29, in observance of Good Friday.
What we’re reading (3/27)
“A Historic And Clubby Group In London Could Face Billions In Claims From The Baltimore Bridge Collapse” (Business Insider). “Analysts with Barclays estimate insurance claims from the bridge itself could total $1.2 billion, with as much as $700 million in claims for wrongful deaths, plus additional costs from business interruptions related to the port closure and bridge reconstruction, Bloomberg reported.”
“The Fight For AI Talent: Pay Million-Dollar Packages And Buy Whole Teams” (Wall Street Journal). “Tech companies are serving up million-dollar-a-year compensation packages, accelerated stock-vesting schedules and offers to poach entire engineering teams to draw people with expertise and experience in the kind of generative AI that is powering ChatGPT and other humanlike bots. They are competing against each other and against startups vying to be the next big thing to unseat the giants.”
“The Fallout From A Credit Card Shake-Up” (Dealbreaker). “A long-running fight between the credit card giants Visa and Mastercard and retailers in the United States is nearing an end, with the promise of lower fees for merchants…Visa and Mastercard said on Tuesday that they had agreed to reduce swipe fees, costs associated with the use of a credit card, for about five years. Lawyers for merchants who had brought the case estimate that this could save about $30 billion worth of fees.”
“Tom Hayes Really Wishes He Did His LIBOR-Rigging In New York” (Dealbreaker). “Tom Hayes, the former Citigroup and UBS trader who bore the brunt of the backlash against banks rigging the still-just-breathing London Interbank Offered Rate, will not be going back to jail, where he spent more than five years. But he and his fellow LIBOR-fiddler and formerly imprisoned scapegoat, ex-Barlcays trader Carlo Palombo, won’t be getting their good names (or a load of money) back, either, such as they are…In addition to being weird and winding up in a job where essentially everyone was breaking the law, Hayes can now add to his list of misfortunes being British. After all, if he’d been American, he’d likely never have spent much more than a few hours behind bars, given that, all the sound and fury and convictions notwithstanding, manipulating interest rates isn’t illegal on this side of the pond.”
“Daniel Kahneman, Nobel Laureate Who Upended Economics, Dies At 90” (Washington Post). “Dr. Kahneman took a dim view of people’s ability to think their way through a problem. ‘Many people are overconfident, prone to place too much faith in their intuitions,’ he wrote in his popular 2011 book, ‘Thinking, Fast and Slow.’ ‘They apparently find cognitive effort at least mildly unpleasant and avoid it as much as possible.’”
What we’re reading (3/26)
“Baltimore Bridge Collapse Reverberates From Cars To Coal” (Bloomberg). “As much as 2.5 million tons of coal, hundreds of cars made by Ford Motor Co., and General Motors Co., and lumber and gypsum are threatened with disruption after the container ship Dali slammed into and brought down Baltimore’s Francis Scott Key Bridge in the early hours of Tuesday.”
“Is Private Equity’s Bet On Life Insurance Turning Sour?” (Financial Times). “The IMF is urging regulators to consider the risks to the financial system posed by insurers either owned by — or whose assets are managed by — private equity groups. It calls them ‘PE-influenced’ insurers. Such firms, it said, were “more vulnerable” to a credit downturn, due to their higher proportion of illiquid assets, a situation that could be “aggravated” by the embedded leverage in structured credit.”
“The Stock Market Is Seeing One Of The Strongest 1st Quarters Of The Postwar Era. What That May Hold For The Rest Of 2024.” (MarketWatch). “It’s the final week of the first quarter and the S&P 500 is on track for a price gain of nearly 10% — and has rallied nearly 30% off its Oct. 27 closing low — leaving investors to ponder just how much good news is already baked into the market.”
“Boeing’s Embattled CEO Is Poised To Walk Away With Millions” (CNN Business). “Exactly how much Calhoun will receive isn’t clear yet, as it depends on how Boeing’s stock performs. A Boeing spokesperson said that details of his compensation will be shared in company filings in the coming weeks. But we already know that Calhoun has made about $63 million over the past three years in total compensation, according to regulatory filings. That includes a $1.4 million base salary, plus millions in stock-based incentives.”
“Why Treasury Yields Are Rising Despite Rate-Cut Expectations” (Wall Street Journal). “Inflation readings for January and February came in firmer than expected, and economic growth has proved resilient, forcing investors to dial back their rate-cut bets. Now, traders expect rates to end the year between 4.5% and 4.75%.”
What we’re reading (3/25)
“Boeing’s Next CEO Will Have ‘Massive Job’ At Company In Crisis” (Wall Street Journal). “Federal probes, sloppy factories, angry airlines, tense union negotiations and supply-chain snarls. Boeing’s crisis won’t end when David Calhoun exits as chief executive. The next leader of the American manufacturing icon will have to address some of the same issues that Calhoun, a longtime Boeing director, was brought on to clean up four years ago when the board he led ousted his predecessor.”
“Adam Neumann Makes A $500 Million Bid For WeWork That Could Hit $900 Million If Financing And Diligence Firm Up” (CNBC). “Neumann’s financing was not immediately clear, although people familiar with the matter told CNBC that Dan Loeb’s Third Point was not involved in the offer. Neumann’s counsel had previously said that Loeb’s investment firm was backing the WeWork founder’s offer, but Third Point disputed that assertion in a prior statement.”
“Meta Pursues AI Talent With Quick Offers, Emails From Mark Zuckerberg” (The Information). “In a sign of how seriously the social media company is taking the competition for AI talent, CEO Mark Zuckerberg has personally written to researcher’s as Google’s DeepMind unit to recruit them, according to two people who viewed the emails.”
“Why Investors Think Reddit Is Worth $1 Billion More Than The New York Times” (Business Insider). “Reddit, which loses money, is currently worth about $8.15 billion. The New York Times, which makes money, is worth about $7.2 billion…if you're running a media business, you understand precisely why investors are more excited about Reddit than the Times: The Times spends lots of money to make the content that readers and advertisers pay for. Reddit gets all of it for free, from its users.”
“A Higher Bid, And National Security Concerns, For An Ammunition Maker” (DealBook). “A battle over Vista Outdoor, the company behind top ammunition brands like Remington and Camelbak water bottles, is escalating — and national security is becoming a bigger factor in the fight. The investment firm MNC Capital on Monday raised its bid for the company to $3 billion, DealBook is first to report, hoping that a more generous offer — and further uncertainty that a rival bidder, the Czechoslovak Group, can pass a U.S. national security review — will win over Vista’s shareholders.”
What we’re reading (3/22)
“The New Normal For Mortgage Rates Will Be Higher Than Many Hope” (Wall Street Journal). “The extra yield over Treasurys—or spread—demanded by investors to own mortgage-backed securities issued by government-sponsored enterprises such as Fannie Mae or Freddie Mac, known as agency MBS,has come down a bitfrom the highs touched last year. But it still hasn’t narrowed back to historical levels. Wider spreads appear to be a new normal for the mortgage market. That in turn means homebuyers for now can expect to keep paying relatively higher rates.”
“The Trustbuster Who Has Apple And Google In His Sights” (New York Times). “Shortly after Jonathan Kanter took over the Justice Department’s antitrust division in November 2021, the agency secured an additional $50 million to investigate monopolies, bust criminal cartels and block mergers. To celebrate, Mr. Kanter bought a prop of a giant check, placed it outside his office and wrote on the check’s memo line: ‘Break ’Em Up.’ Mr. Kanter, 50, has pushed that philosophy ever since, becoming a lead architect of the most significant effort in decades to fight the concentration of power in corporate America. On Thursday, he took his biggest swing when the Justice Department filed an antitrust lawsuit against Apple.”
“Charts Show A Sharp Rise In The Rate Of Young Adults Getting Cancer Before Age 50” (Business Insider). “The rate of young adults being diagnosed with cancer has risen sharply in the past 30 years, particularly in high-income countries. Researchers aren't sure why.”
“Lawyering In The Age Of Artificial Intelligence” (Choi, Monahan, and Schwarcz). “We conducted the first randomized controlled trial to study the effect of AI assistance on human legal analysis. We randomly assigned law school students to complete realistic legal tasks either with or without the assistance of GPT-4. We tracked how long the students took on each task and blind-graded the results. We found that access to GPT-4 only slightly and inconsistently improved the quality of participants’ legal analysis but induced large and consistent increases in speed. AI assistance improved the quality of output unevenly—where it was useful at all, the lowest-skilled participants saw the largest improvements. On the other hand, AI assistance saved participants roughly the same amount of time regardless of their baseline speed.”
“Little League Scandal Roils Washington, D.C., Elite” (Wall Street Journal). “Emotions can run high in Little League, a touchstone of childhood for millions, and while blowouts sometimes raise suspicions of foul play, most parents keep the speculation to a whisper. That isn’t the case when the moms and dads of Little Leaguers are law-firm partners, lobbyists and other Beltway heavy-hitters.”
What we’re reading (3/20)
“Fed Meeting Recap: Everything Powell Said During Wednesday’s Market-Moving News Conference” (CNBC). “The Federal Reserve held steady on interest rates at the conclusion of its March meeting, and it’s sticking with its forecast for three interest rate cuts. During a news conference Fed Chair Jerome Powell noted that a strong jobs market wouldn’t deter the central bank from cutting rates.”
“The Era Of No-Brainer 5% Returns On Cash Is Ending” (Wall Street Journal). “It’s getting more complicated to hold cash. Certificates of deposit, money-market funds and various other cashlike investments have offered healthy returns, in many cases over 5%, since the Federal Reserve started lifting interest rates two years ago. But the central bank signaled Wednesday it expects to cut rates three times before the end of the year. Some cashlike investments are staying strong while others have begun to decline in yield.”
“The Private Equity Market Has Stalled — And There’s No Easy Fix” (Institutional Investor). “With $3.2 trillion in assets waiting for an exit plan sitting in their portfolios, private equity funds are facing market woes unlike anything since the financial crisis of 2008, according to the 2024 global private equity report by consultant Bain & Co. But this time around, the industry may not have the Federal Reserve coming to its rescue. ‘The word for this market is stalled,’ Hugh MacArthur, chairman of Bain’s global private equity practice, said in the report. ‘The culprit was the sharp and rapid increase in central bank rates.’”
“Reddit Is Going Public. Will Its Unruly User Base Revolt?” (Vox). “Reddit, the launchpad for many meme stocks, could now become one: The social media giant makes its debut on Wall Street this week in one of the most highly anticipated initial public offerings of the year. The nearly 20-year-old company is seeking to raise up to $748 million in its IPO on March 21, putting its valuation at about $6.4 billion. It’s the first time that a major social media company has gone public since Snap (i.e., Snapchat) in 2017. It will sell approximately 22 million shares priced at $31 to $34 each under the ticker symbol ‘RDDT.’”
“Harvard Has Halted Its Long-Planned Atmospheric Geoengineering Experiment” (MIT Technology Review). “Proponents of solar geoengineering research argue we should investigate the concept because it may significantly reduce the dangers of climate change. Further research could help scientists better understand the potential benefits, risks and tradeoffs between various approaches. But critics argue that even studying the possibility of solar geoengineering eases the societal pressure to cut greenhouse gas emissions.”
What we’re reading (3/19)
“The Fed Is Playing A Waiting Game On Rate Cuts. The Rules Are Starting To Change.” (Wall Street Journal). “For investors, the big question hanging over this week’s meeting of the Federal Reserve is whether it will wait a little longer to cut interest rates because of recent, firm inflation readings. The Fed, though, has a different preoccupation: If it waits too long, will it inadvertently cause a recession? Officials won’t put recession risk front and center this week. Yet that risk is likely to drive its thinking over the remainder of the year, leaving it on track to cut rates at some point.”
“Here’s Everything To Expect From The Federal Reserve’s Policy Meeting Wednesday” (CNBC). “In addition to releasing its rate decision after the meeting wraps up Wednesday, the central bank will update its economic projections as well as its unofficial forecast for the direction of interest rates over the next several years. As expectations have swung sharply this year for where the Fed is headed, this week’s two-day session of the Federal Open Market Committee will draw careful scrutiny for any clues about the direction of interest rates.”
“Why Are Americans Still Down On The Economy? (Paul Krugman). “I’ve been struck by the results of swing-state polls being conducted by Quinnipiac University, which ask respondents about both the national economy and their personal financial situations. In the latest poll, of Michigan voters, only 35 percent of people said that the national economy was excellent or good, while 65 percent said it was not so good or bad. But when asked about their personal finances the proportions were basically reversed, with 61 percent saying that they were in excellent or good shape and 38 percent saying they were in not so good or bad shape.”
“The Era Of The AI Home Broker Approaches” (Axios). “An AI trained on the actions of very good brokers would be able to forward new listings to clients within seconds of them appearing; would be up to speed on the plethora of documents and payments that need to be brought to a closing; and could answer questions in an approachable, conversational style 24 hours a day.”
“Same Old Song: Private Equity Is Destroying Our Music Ecosystem” (New York Times). “Does that song on your phone or on the radio or in the movie theater sound familiar? Private equity — the industry responsible for bankrupting companies, slashing jobs and raising the mortality rates at the nursing homes it acquires — is making money by gobbling up the rights for old hits and pumping them back into our present. The result is a markedly blander music scene, as financiers cannibalize the past at the expense of the future and make it even harder for us to build those new artists whose contributions will enrich our entire culture.”
What we’re reading (3/18)
“Hedge Funds Ramp Up Leverage To Near Record Highs To Juice Returns” (Reuters). “Hedge funds' use of leverage in equities trading is near record levels after debt-fueled strategies ballooned in recent years and an upturn in financial markets prompted riskier bets, according to two banking sources and recent client notes from major banks. Fresh data compiled by Goldman Sachs, JPMorgan and Morgan Stanley, the three largest global prime brokerages, seen by Reuters in notes distributed to a restricted group of clients, show that leverage used to juice up returns is at or close to historical highs, depending on the bank.”
“Once America’s Hottest Housing Market, Austin Is Running In Reverse” (Wall Street Journal). “Austin was at the forefront of the U.S. housing boom, when rock-bottom borrowing costs near the start of the pandemic fueled robust sales and sent home prices to new highs. Austin prices soared more than 60% from 2020 to the spring of 2022. A surge in interest rates crushed the housing market nationwide, and existing-home sales fell to a nearly 30-year low in 2023. Despite that collapse, home prices remain near record levels thanks to tight supply. But in Austin, according to the Freddie Mac House Price Index, prices have fallen more than 11% since peaking in 2022, the biggest drop of any metro area in the country.”
“8 Incidents In 2 Weeks: What’s Going On With United’s Planes?” (New York Times). “An engine fire sparked by plastic packaging wrap, a tire lost shortly after takeoff and a plane veering off the runway: These are among the eight incidents that have occurred over the past two weeks on flights operated by United Airlines. While no injuries — or worse — have been reported, the mishaps have generated headlines and stoked rising anxiety about aviation safety among federal officials and passengers alike.”
“Musk Says His Ketamine Prescription Is In Investors’ Best Interests” (Bloomberg). “For Wall Street, ‘what matters is execution,’ Musk said in an interview with former CNN anchor Don Lemon streamed Monday on YouTube. ‘From an investor standpoint, if there is something I’m taking, I should keep taking it,’ he said referring to Tesla’s success.”
“Online Selling Platforms Amplify Consumer Preference For Local” (RealClear Markets). “The way Americans shop has radically changed over the last couple decades. The decline of traditional shopping malls and rise of online shopping followed by the COVID-19 pandemic ushered in an era of uncertainty for many retail small businesses. Yet, recent numbers suggest that American small businesses have finally found their footing when it comes to evolving with the way consumers shop. In fact, mom-and-pop shops across the country experienced a selling frenzy during the last holiday season. Much of that success is due to the full embrace of the digital era of retail.”