What we’re reading (7/15)
“Powell Indicates Fed Won’t Wait Until Inflation Is Down To 2% Before Cutting Rates” (NBC News). “Federal Reserve Chair Jerome Powell said Monday that the central bank will not wait until inflation hits 2% to cut interest rates. Speaking at the Economic Club of Washington D.C., Powell referenced the idea that central bank policy works with ‘long and variable lags’ to explain why the Fed wouldn’t wait for its target to be hit.”
“Stock Dudes Risk A Market Wipeout” (Wall Street Journal). “The wave that broke was the momentum trade, which had pushed the ‘Magnificent Seven’ megacapitalization stocks and anything related to artificial intelligence to dizzying heights, leaving the rest of the market far behind. The question for investors now is whether the breakers will hit the rocks, or merely prove to be white caps far from the shore. Is the megacap trade over?”
“Unearthed 1980s Bill Gates Interview Features The Microsoft Founder Talking About The Earliest Iterations Of AI” (Business Insider). “‘Another thing that we're trying to get the computer to do is learn,’ Gates said in the interview. ‘That is, after you've used it for a while, then you'll be able to refer back to something you've done previously so you don't have to repeat those commands.’ He added that the computer will be able to recognize mistakes the same way ‘a human coworker might and aid you in the working process with the machine.’”
“As Policy Types Cheer the Demise Of ‘Inflation,’ Inflation Arrives” (Forbes). “Here lies the error, one of many, in using market prices as a proxy for what is always and everywhere a currency phenomenon. As has been said here over and over again, and for years, there’s an ocean of difference between rising prices and inflation. Inflation is a shrinkage of the monetary measure, in our case the dollar. Higher prices are at best a consequence of the inflation.”
“How Janet Yellen Became An Unlikely Culinary Diplomat” (New York Times). “There was mayonnaise mixed with ants at a gastronomic taqueria in Mexico City. The garlic at a Persian restaurant in Frankfurt was aged 25 years. And, yes, the magic mushrooms in Beijing were hallucinogenic. This isn’t an Anthony Bourdain travel show but rather a taste of what Janet L. Yellen, the Treasury secretary, has been eating on the road over the more than 300,000 miles she has logged over the last three years as she has been grappling with inflation and devising new ways to cripple the Russian economy.”
What we’re reading (7/14)
“Robert Putnam Knows Why You’re Lonely” (New York Times). “I think we’re in a really important turning point in American history. What I wrote in ‘Bowling Alone’ is even more relevant now. Because what we’ve seen over the last 25 years is a deepening and intensifying of that trend. We’ve become more socially isolated, and we can see it in every facet in our lives.”
“‘Dollarization’ In Argentina Isn't A Policy Choice, It’s A Market Condition” (RealClear Markets). “With money that’s actually used by producers, the simple, unspoken truth is that its circulation is production determined. Where there’s production there’s always “money” facilitating the movement of production as though placed there by an invisible hand. And where production is slight, there’s very little money as a reflection of scant production.”
“What If The A.I. Boosters Are Wrong?” (DealBook). “[MIT economist Daron] Acemoglu concluded that A.I. would contribute only “modest” improvement to worker productivity, and that it would add no more than 1 percent to U.S. economic output over the next decade. That pales in comparison to estimates by Goldman Sachs economists, who predicted last year that generative A.I. could raise global G.D.P. by 7 percent over the same period.”
“Pork Producer Smithfield Plans U.S. Stock Listing” (Wall Street Journal). “The Chinese parent of Smithfield Foods says it plans to take the pork company public in the U.S. WH Group, the world’s largest pork-producing company by sales, said Sunday it plans to float Smithfield’s business in the U.S. and Mexico on the New York Stock Exchange or Nasdaq.”
“Global Markets Ramp Up The ‘Trump Trade’ After Rally Attack” (Yahoo! Finance). “The series of wagers — based on anticipation that the Republican’s return to the White House would usher in tax cuts, higher tariffs and looser regulations — had already been gaining ground since President Joe Biden’s poor performance in last month’s debate imperiled his re-election campaign. But the trades were expected to take deeper hold, with Trump galvanizing supporters and drawing sympathy by exhibiting defiant resilience after being shot in the ear on stage at a Pennsylvania rally.”
What we’re reading (7/13)
“A Beautiful Inflation Report” (New York Times). “One of my go-to economic data experts emailed on Thursday morning about the latest inflation report, which showed prices actually falling in June and up only 3 percent over the past year. It was, he declared, ‘beautiful.’ Your aesthetic sense may vary, but we’ve now had two months of really good price data, enough to puncture the bubble of pessimism that, um, inflated early this year. And the implications of the good news are pretty big.”
“Big Banks And Customers Continue To Feel Pressure From Higher Rates” (Wall Street Journal). “The fight to rein in inflation continues to weigh on some of the nation’s largest banks. Higher interest rates crimped their profits and left more consumers struggling to keep up with elevated borrowing costs.”
“Jane Fraser Is Trying To Pull Chronically Struggling Citigroup Out Of The Gutter. She May Actually Pull It Off” (CNN Business). “Fraser, the first woman ever to run a Wall Street bank, inherited a behemoth that had become a laughingstock among its peers, hobbled by its unwieldy bureaucracy, a bloated staff and slim profit margins…But lately, to the surprise of Citi’s critics, things are looking up. Since September, when Fraser laid out her vision for a more streamlined Citigroup, the bank’s stock has shot up more than 50%.”
“Wall Street Is Bullish On Stocks For The 2nd Half Of The Year. Here Are Each Firm’s Exact Forecasts.” (Business Insider). “The S&P 500 has soared this year, with the index jumping about 15% to record highs in the first half. With the second half of 2024 underway, Wall Street strategists are updating their year-end price targets for the S&P 500, and nearly all of them are leaning bullish as they increase their forecasts.”
“The Class Gap In Career Progression: Evidence From US Academia” (Anna Stansbury & Kyra Rodriguez). “Unlike gender or race, class is rarely a focus of research or DEI efforts in elite US occupations. Should it be? In this paper, we document a large class gap in career progression in one labor market: US tenure-track academia. Using parental education to proxy for socioeconomic background, we compare career outcomes of people who got their PhDs in the same institution and field (excluding those with PhD parents). First-generation college graduates are 13% less likely to end up tenured at an R1, and are on average tenured at institutions ranked 9% lower, than their PhD classmates with a parent with a (non-PhD) graduate degree. We explore three sets of mechanisms: (1) research productivity, (2) networks, and (3) preferences. Research productivity can explain less than a third of the class gap, and preferences explain almost none. Our analyses of coauthor characteristics suggest networks likely play a role. Finally, examining PhDs who work in industry we find a class gap in pay and in managerial responsibilities which widens over the career. This means a class gap in career progression exists in other US occupations beyond academia.”
What we’re reading (7/10)
“An Exodus Of Investors Is Underway At Index Ventures On The Back Of A $2.3 Billion Fundraise” (Business Insider). “From the outside, things are looking rosy at Index Ventures. This week, the 28-year-old venture capital firm debuted a new pair of funds totaling $2.3 billion, a substantial sum during an abysmal time for the industry's fundraising efforts. However, a series of departures at the firm paints a darker picture of Index's state. Last week, the firm parted ways with five investors in its San Francisco office, including mid-level dealmakers and a senior dealmaker, according to four people familiar with the matter. The turnover came during management's midyear check-ins with staff.”
“Zucker Unbound! CBS News Change, Paramount Sale Points Former CNN Chief To Tiffany Network” (Showbiz 411). “Jeff Zucker is coming back! Sources tell me that today’s announcement that CBS News chief Ingrid Cipirian-Matthews is gone probably means one thing: the return of Jeff Zucker. What’s going on here? … in all likelihood, Ellison has purchased Paramount. And [Jeff] Shell [former NBC Universal chairman] is advising him. First project: give CBS some pizzazz with Zucker.”
‘“I’m Not Naive’: Inside Emma Tucker’s Rocky Wall Street Journal Reboot” (Vanity Fair). “Tucker, a personable and somewhat irreverent Brit, took over the Journal in February 2023. In a little over a year, the 57-year-old journalist has brought color, voice, and a renewed metabolism to America’s business newspaper of record. Sure, you’ll still find stories about interest-rate cuts and investment income. But you’ll also find investigations into Elon Musk’s unusual relationships with women at SpaceX and drug use, the succession battle for the luxury empire LVMH, and messages that Hamas military leader Yahya Sinwar sent to compatriots and mediators. (An attorney for Musk told WSJ that he’s never failed a drug test at SpaceX.) Tucker’s goal is to make the paper ‘audience-first’ and ‘to grow and retain subscribers,’ she told me. It might not sound like the most visionary mission. But the Journal today is, well, better—a more compelling product that a wider swath of people might pick up and read.”
“Costco Hikes Membership Fee For The First Time Since 2017” (CNBC). “The membership-based warehouse club said Wednesday that it will increase its membership fee by $5 in the U.S. and Canada as of Sept. 1. That is an increase to $65 from $60 for annual memberships. Its higher-tier plan, called ‘Executive Membership,’ will increase to $130 a year from $120.”
“The Age Question Looms Over America’s Bosses” (Wall Street Journal). “Leadership and cognitive decline are pressing issues throughout America’s aging workforce. High-powered professionals increasingly work past traditional retirement ages, even as ageism pushes others to leave careers early. There will be twice as many workers 75 and older in 2030 as there were in 2020, the Bureau of Labor Statistics projects.”
What we’re reading (7/9)
“Powell Inches The Fed Closer To Cutting Rates” (Wall Street Journal). “Federal Reserve Chair Jerome Powell made a subtle but important shift that moved the central bank closer to lowering interest rates when he suggested Tuesday that a further cooling in the labor market could be undesirable.”
“What Happens When Your Bank Isn’t Really a Bank And Your Money Disappears?” (New York Times). “The promise of bank insurance — a tenet of U.S. consumer protection since the Great Depression — is now being tested by a crisis swirling around online-only lenders with hundreds of millions of dollars of deposits between them. Customer accounts have been frozen, preventing people from cashing out their life savings. Most depositors have little clue where their money has gone, and whether they will get any of it back. The turmoil was set off this spring with the bankruptcy of Synapse Technology, the kind of company you’ve probably never heard of unless you suffered through all the fine print of your account statements. It operated banking software for fast-growing online lenders with names like Juno, Yieldstreet and Yotta.”
“It Suddenly Looks Like There Are Too Many Homes For Sale. Here’s Why That’s Not Quite Right. (CNBC). “The numbers…are deceiving due to the unprecedented dynamics of today’s housing market, which can be traced back two decades to another unprecedented time in housing, the subprime mortgage boom. All of it is precisely why home prices, which usually cool off when supply is high, just continue to rise.”
“A Bank Created Fake Accounts, Forced Clients Into Unnecessary Car Insurance And Repossessed Vehicles When They Didn’t Pay. Now It Has Agreed To $20 Million In Penalties” (CNN Business). “Fifth Third Bank on Tuesday said it agreed to pay $20 million in penalties imposed by the Consumer Financial Protection Bureau to settle a CFPB investigation into its auto insurance practices, and a 2020 lawsuit the agency filed pertaining to the bank’s creation of fake customer accounts.”
“The Precipitous Fall Of The Japanese Yen” (The Week). “There are several factors, but it is mainly a ‘product of divergent monetary policy between the Bank of Japan and its developed-market peers — particularly the Federal Reserve,’ said Barron's. This is the result of a wide difference in interest rates between the U.S. and Japan; the Bank of Japan ‘has only just begun to ease off intense monetary stimulus, while the Fed and other central banks are years into tightening cycles.’”
What we’re reading (7/8)
“Why Your Fund Manager Can’t Beat Today’s Stock Market” (Wall Street Journal). “[T]raditional measures like correlation and dispersion have lost much of their meaning and nearly all of their relevance. The 10 biggest stocks own the market right now, and anyone who doesn’t own them is left out in the cold—at least for the time being.”
“How A New York Short-Seller Took On One Of The World’s Richest People, Wiped Out $150 Billion In Market Value, And Barely Made Any Money” (Insider). “Nate Anderson, the chief mind behind activist short-seller Hindenburg Research, has had an eventful past 18 months. In January 2023, he accused the Indian conglomerate owned by Gautam Adani — one of the world's richest people — of fraud, subsequently wiping out $153 billion in market value from its associated companies. This led Indian regulators to his doorstep and forced him into defensive mode. A war of words has persisted ever since. A year and a half later, the battle continues. And based on new information released by Hindenburg, one might wonder whether it was all worth it.”
“The Intense Battle To Stop AI Bots From Taking Over The Internet” (The Independent). “A number of companies have taken major steps to stop scrapers from attempting to take their text. It is the latest front in an ongoing and apparently escalating battle between websites that allow people to read text and the AI companies that wish to use it to build their new tools.”
“Property Fraud Allegations Snowball As Commercial Real-Estate Values Fall” (Wall Street Journal). “Regulators and federal prosecutors say that property loans based on doctored building financials and valuations have been rising. This type of fraud became more widespread between the mid-2010s and 2021, federal investigators and real-estate brokers say, when commercial property prices surged to new highs and landlords had much to gain from such maneuvers. Now, the drop in property values caused by higher interest rates and a rise in defaults are exposing more of these schemes, dealing another blow to a commercial real-estate market suffering through its worst stretch since the 2008-09 financial crisis.”
“The American Elevator Explains Why Housing Costs Have Skyrocketed” (New York Times). “Through my research on elevators, I got a glimpse into why so little new housing is built in America and why what is built is often of such low quality and at high cost. The problem with elevators is a microcosm of the challenges of the broader construction industry — from labor to building codes to a sheer lack of political will. These challenges are at the root of a mounting housing crisis that has spread to nearly every part of the country and is damaging our economic productivity and our environment.”
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, I will be measuring the performance on these picks from the first trading day of the month, Monday, July 1, 2024 (at the mid-spread open price) through the last trading day of the month, Wednesday, July 31, 2024 (at the mid-spread closing price).
What we’re reading (6/28)
“Wall Street Seems Calm. A Closer Look Shows Something Else.” (New York Times). “A widely tracked measure of bets on more volatility to come is close to its lowest-ever level. But a look beneath the surface reveals much greater turbulence. Nvidia, for example, whose rising stock price helped it become the most valuable public company in America last week, is up more than 150 percent this year. The price has also repeatedly had deep plunges in the last six months, shaving billions of dollars of market value each time.”
“Diversity Was Supposed To Make Us Rich. Not So Much.” (Wall Street Journal). “When management consulting firm McKinsey declared in 2015 that it had found a link between profits and executive racial and gender diversity, it was a breakthrough. The research was used by investors, lobbyists and regulators to push for more women and minority groups on boards, and to justify investing in companies that appointed them. Unfortunately, the research doesn’t show what everyone thought it showed.”
“Inside The New Job Stress Test” (Business Insider). “Purporting to be the "only sports evaluation that scientifically measures an athlete's game-speed cognitive abilities down to a millisecond level," these tests — which feel like a cross between playing Pong and taking an eye exam — have fast become part and parcel of how many scouts find the next billion-dollar athlete. More than 52 colleges and universities and 16 of the NFL's 32 teams pay S2 to administer tests to prospective signees and to keep the results confidential.”
“Mark Zuckerberg Warns AI Companies Are ‘Trying To Create God’ In Stark Warning – But He Has The Key To Save Us All” (The U.S. Sun). “‘I find it a pretty big turnoff when people in the tech industry kind of talk about building this one true AI,’ Zuckerberg said. ‘It's almost as if they think they're creating God or something. And it's like, that's not what we're doing.’ The tech tycoon sat down for an interview with YouTube creator Kane Kallaway to discuss the future of AI and tease the tools in development at Meta.”
“Layoffs Watch ’24: Baupost Group” (Dealbreaker). “Seth Klarman thinks things are gonna get pretty bad, which means they’re already bad for one in five members of his Baupost Group’s investing team. Eleven of them have been given their walking papers, the largest layoff in the Boston hedge fund’s history, and its first significant reduction since pandemic days.”
July picks available soon
I’ll be publishing the Prime and Select picks for the month of July before Monday, July 1 (the first trading day of the month). As always, SPC’s performance measurement for the month of May, as well as SPC’s cumulative performance, will assume 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 28). 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 1).
What we’re reading (6/25)
“Americans Chasing High Interest Rates Risk Falling Into A ‘Cash Trap’” (Wall Street Journal). “Americans have poured money into cash-like investments since the Fed began raising interest rates, driving assets in money-market funds to a record $6.12 trillion earlier this month, according to the Investment Company Institute. Now, Wall Street traders are betting rates have peaked and those investors face a choice: keep sitting on their cash as interest payments shrink, or figure out how to redeploy the money.”
“Bond Traders Boldly Bet On 300 Basis Points Of Fed Cuts By March” (Bloomberg). “Traders in the US rates options market are embracing a nascent wager on the Federal Reserve’s interest-rate path: a whopping 3 percentage points worth of cuts in the next nine months. Over the past three sessions, positioning in the options market linked to the Secured Overnight Financing Rate shows an increase in bets that stand to benefit if the central bank reduces its key rate to as low as 2.25% by the first quarter of 2025.”
“Fed Officials Are Talking Down The Chance Of Rate Cut This Year” (CNN Business). “At the beginning of the year, Federal Reserve officials projected they would cut interest rates three times this year. By June, they had lowered that projection to just one cut. Now some key policymakers say it won’t happen at all. On Tuesday morning, Fed governor Michelle Bowman said that she’s expecting no rate cuts this year.”
“Julian Assange Pleads Guilty To Espionage Charge, Ending Years Of Legal Deadlock” (Washington Post). “WikiLeaks founder Julian Assange pleaded guilty Tuesday to a felony charge of violating the Espionage Act after his organization obtained and published classified military and diplomatic documents in 2010.”
“Elon Musk Argues Twitter Flip-Flopping Not Manipulation Because His Legal Case Was So Bad” (Dealbreaker). “Late last week, Elon Musk’s attorneys from Quinn Emanuel offered a new theory for tossing an investor suit claiming that his public bad-mouthing and eventual litigation over his Twitter acquisition was an effort to drive down the share price: no one reasonably could be dumb enough to believe him.”
What we’re reading (6/24)
“Hedge Funds Made A Killing On FTX—Then It Got Complicated” (Wall Street Journal). “Hedge funds and other distressed investors rejoiced last month when bankruptcy managers said the corporate carcass of FTX, Sam Bankman-Fried’s collapsed crypto exchange, had enough assets to more than make its creditors whole. Since FTX’s 2022 implosion, hedge funds had scooped up the rights to customers’ frozen accounts for pennies on the dollar, with five firms alone buying claims with a combined face value of about $2.4 billion. That meant a huge payday was in store. But collecting these winnings won’t be straightforward. Investors are mired in legal battles with some of the original owners of the claims. They allege those former FTX customers abruptly reneged on trades and are suffering from an age-old affliction: seller’s remorse.”
“After Surpassing Microsoft, Can Chipmaker Nvidia Remain World’s Most Valuable Company?” (New York Post). “This week, chipmaker Nvidia soared to a market capitalization of more than three trillion dollars, surpassing Microsoft as the most valuable company on the planet. The historic run-up has drawn comparisons to the headier days of the dot-com era nearly three decades ago. Are they correct? When it comes to Nvidia, we’re probably not in a bubble — at least not yet. Indeed, investors have good reason to remain optimistic about the chip-maker’s prospects.”
“Nvidia’s Shares Are On Fire. The Broader Market Looks Less Rosy” (CNN Business). “The S&P 500 index has jumped nearly 15% so far in 2024, notching 31 new peaks along the way. Much of those returns have been driven by the mega-cap Magnificent Seven stocks, which have seen explosive growth as investors pour cash into the burgeoning artificial intelligence boom. But beyond that cohort of tech stocks, the market is looking less rosy. The S&P 500 equal-weighted index, which gives every stock the same weighting, has risen just 4% this year.”
“Uh-Oh: A Story Of SpaghettiOs And Forgotten History” (Snack Stack). “Beyond the shape, the new products sold well because they capitalized on the broader trend of Italian (and Italian-inspired) foods made for an American audience. Goerke was surfing that wave. A decade earlier, newspapers identified had identified part of the rising fad of “Continental” food, and pizza and pasta and their ilk were becoming ubiquitous. (Go read Ian McCellan’s Red Sauce if you’d like a deep dive.)”
“One Index, Two Publishers And The Global Research Economy” (David Mills, Oxford Review of Education). “The emergence of a global science system after the second world war was spurred by transformations in academic publishing and information science. Amidst Russian-American technological rivalries, funding for science expanded rapidly. Elsevier and Pergamon internationalised journal publishing, whilst tools such as the Science Citation Index changed the way research was measured and valued. This paper traces the connections between the post-war expansion of academic research, new commercial publishing models, the management of research information and Cold War geopolitics. Today, the analysis and use of research metadata continues to revolutionise science communication. The monetisation of citation data has led to the creation of rival publishing platforms and citation infrastructures. The value of this data is amplified by digitisation, computing power and financial investment. Corporate ownership and commercial competition reinforce geographical and resource inequalities in a global research economy, marginalising non-Anglophone knowledge ecosystems as well as long-established scholar-led serials and institutional journals. The immediate future for academic publishing will be shaped by a growing divide between commercial and ‘community-owned’ open science infrastructures.”
What we’re reading (6/23)
“Can The Dollar Stay On Top?” (The Week). “‘The big threat to dollar dominance is American dysfunction,’ Steven B. Kamin and Mark Sobel said at Financial Times. The dollar gets its strength from the size of the American economy, which produces 25% of global GDP. That could all go away, though, if "U.S. political dysfunction continues to run amok’ and politicians continue to add to the national debt at unsustainable rates. ‘If the U.S. doesn’t keep its house in better order, dollar dominance will be the least of our worries.’”
“Apple, Meta Have Discussed An AI Partnership” (Wall Street Journal). “In its hustle to catch up on AI, has been talking with a longtime rival: Meta. Facebook’s parent has held discussions with Apple about integrating Meta Platforms’ generative AI model into Apple Intelligence, the recently announced AI system for iPhones and other devices, according to people familiar with the matter. Meta and other companies developing generative AI are hoping to take advantage of Apple’s massive distribution through its iPhones—similar to what Apple offers with its App Store on the iPhone.”
“Evidence Of A Log Scaling Law For Political Persuasion With Large Language Models” (Hackenburg, et al.). “Large language models can now generate political messages as persuasive as those written by humans, raising concerns about how far this persuasiveness may continue to increase with model size…Our findings are twofold. First, we find evidence of a log scaling law: model persuasiveness is characterized by sharply diminishing returns, such that current frontier models are barely more persuasive than models smaller in size by an order of magnitude or more. Second, mere task completion (coherence, staying on topic) appears to account for larger models' persuasive advantage. These findings suggest that further scaling model size will not much increase the persuasiveness of static LLM-generated messages.”
“AI Is Exhausting The Power Grid. Tech Firms Are Seeking A Miracle Solution.” (Washington Post). “The mighty Columbia River has helped power the American West with hydroelectricity since the days of FDR’s New Deal. But the artificial intelligence revolution will demand more. Much more. So near the river’s banks in central Washington, Microsoft is betting on an effort to generate power from atomic fusion — the collision of atoms that powers the sun — a breakthrough that has eluded scientists for the past century. Physicists predict it will elude Microsoft, too.”
“After Almost 30 Years, Amazon’s Original Book Business Is Booming, Leaked Document Shows” (Business Insider). “Amazon got its start in 1994 by selling books. Decades later, this original business is thriving and massively outperforming its digital cousin, e-books. This is according to a detailed internal document obtained by Business Insider that discloses a host of new information and insights about Amazon’s book business and the broader publishing landscape.”
What we’re reading (6/23)
“America’s Top Export May Be Anxiety” (The Atlantic). “Smartphones are a global phenomenon. But apparently the rise in youth anxiety is not. In some of the largest and most trusted surveys, it appears to be largely occurring in the United States, Great Britain, Canada, Australia, and New Zealand. ‘If you’re looking for something that’s special about the countries where youth unhappiness is rising, they’re mostly Western developed countries,’ says John Helliwell, an economics professor at the University of British Columbia and a co-author of the World Happiness Report. ‘And for the most part, they are countries that speak English.’”
“These Hot New Funds Are ‘Boomer Candy’ For Retirees” (Wall Street Journal). “Baby boomers who aren’t ready to walk away from the stock market are flocking to a hot new class of funds. They are pouring billions of dollars into exchange-traded funds that use derivatives to produce extra dividend income or protect against losses. Such funds, which were almost nonexistent four years ago, give retirees and other investors the chance to chase stock returns while also protecting against a potential market slide. The funds have almost $120 billion in assets and have taken in at least $31 billion of new investor money over the past 12 months, according to FactSet.”
“The Stock Market Is In Its Longest Stretch Without A 2% Sell-Off Since The Financial Crisis” (CNBC). “Wall Street’s climb to record highs has come with conspicuously little volatility. The S&P 500 has gone 377 days without a 2.05% sell-off. That’s the longest stretch for the benchmark since the great financial crisis, according to FactSet data compiled by CNBC. The index hasn’t experienced a gain of at least 2.15% in that time either.”
“Going After The Middleman” (New York Times). “Business leaders have been combing through comments and transcripts to try to understand the pending priorities of regulators like Lina Khan, the chair of the Federal Trade Commission, and Assistant Attorney General Jonathan Kanter, the head of the Justice Department’s antitrust division. They’ve zeroed in on what may sound like a nerdy legal theory, but one that could have huge implications: the tyranny of the intermediary, middleman companies that abuse their role by squeezing out competition or creating artificially expensive moats. The Justice Department has already made one high-profile strike along these lines, suing to break up Ticketmaster and Live Nation.”
“Americans’ Spending Patterns Are Flashing A Warning Of A Possible Consumer-Led Recession” (Business Insider). “Consumers are finally starting to rein in their spending habits, which could weigh on the economy after a long period of robust spending has propped up economic growth over the past few years. Retail spending ticked 0.1% higher in May, but sales volume has dropped 1.3% year-over-year over the last three months, US Census data shows.”
What we’re reading (6/21)
“Under Armour To Pay $434 Million To Settle 2017 Shareholder Lawsuit” (CNBC). “Under Armour on Friday said it has agreed to pay $434 million to settle a 2017 class action lawsuit accusing the sports apparel maker of defrauding shareholders about its revenue growth in order to meet Wall Street forecasts. The proposed settlement, subject to court approval, averts a scheduled July 15 trial in Baltimore federal court.”
“Paul Singer Can Wait.” (Dealbreaker). “Paul Singer has been called a vulture. Told to go fuck himself, and undoubtedly, over a long career triggering migraines in adversaries, much worse. So we doubt that being compared to Yahwa Sinwar, Tim McVeigh and their like is going to do much to move him…In fairness, not everyone would agree that the such a terme de guerre is hyperbolic. And Singer has never been one to bow down before the bigger boys, be they Rupert Murdoch, Warren Buffett or an actual sovereign nation. So the fact that Veritas’ owner, the Carlyle Group, is a great deal bigger than Elliott Management’s own private equity business isn’t likely to concern Singer much.”
“Will Debt Sink The American Empire?” (Wall Street Journal). “History, however, offers some cautionary notes about the consequences of swimming in debt. Over the centuries and across the globe, nations and empires that blithely piled up debt have, sooner or later, met unhappy ends. Historian Niall Ferguson recently invoked what he calls his own personal law of history: ‘Any great power that spends more on debt service (interest payments on the national debt) than on defense will not stay great for very long. True of Habsburg Spain, true of ancien régime France, true of the Ottoman Empire, true of the British Empire, this law is about to be put to the test by the U.S. beginning this very year.’”
“The Economist Who Figured Out What Makes Workers Tick” (Wall Street Journal). “David Autor cut a peripatetic path through most of his 20s as a one-time college dropout and self-taught mechanic, before he stumbled into economics. ‘I fell into it assbackwards,’ he said. Today, his work is helping shape how the White House is approaching the biggest labor issues from responding to the threat of a ‘China Shock 2.0’ to thinking about the economic impacts of artificial intelligence. Autor has shown how the rise of the computer was hurting middle-class jobs. He sounded the alarm that workers in the South were getting pulverized by Chinese imports, years before Donald Trump was elected president, playing off this fear. Now, Autor’s research has taken an unexpectedly optimistic turn: He has shown how, after the pandemic struck, low-wage workers have started catching up. He holds a hopeful view of AI, arguing that it could help low-skilled workers. ‘To me, the labor market is the central institution of any society,’ said Autor, 60 years old. ‘The fastest way to improve people’s welfare is to improve the labor market.’”
“Political Expression of Academics on Social Media” (Prashant Garg and Thiemo Fetzer). “This paper describes patterns in academics' expression online found in a newly constructed global dataset covering over 100,000 scholars linking their social media content to academic record. We document large and systematic variation in politically salient academic expression concerning climate action, cultural, and economic concepts. We show that these appear to often diverge from general public opinion in both topic focus and style”
What we’re reading (6/21)
“Nvidia’s Success Is The Stock Market’s Problem” (Wall Street Journal). “The Russell 2000 index of smaller companies is down 17% from its November 2021 peak and has made no progress at all this year. In the S&P 500, which includes the biggest companies, the average stock is about where it was at the start of 2022, and more than half of the current constituents are down since then. Worse still, only 198 have managed gains this month, even as the index reached new intraday highs on 11 out of 13 trading days.”
“OpenAI Competitor Anthropic Announces Its Most Powerful AI Yet” (CNBC). “OpenAI competitor Anthropic on Thursday announced Claude 3.5 Sonnet, its most powerful artificial intelligence model yet. Claude is one of the chatbots that, like OpenAI’s ChatGPT and Google’s Gemini, has exploded in popularity in the past year. Anthropic, which was founded by ex-OpenAI research executives, has backers including.”
“Transcendence: Generative Models Can Outperform The Experts That Train Them” (Zhang, et al.). “Generative models are trained with the simple objective of imitating the conditional probability distribution induced by the data they are trained on. Therefore, when trained on data generated by humans, we may not expect the artificial model to outperform the humans on their original objectives. In this work, we study the phenomenon of transcendence: when a generative model achieves capabilities that surpass the abilities of the experts generating its data. We demonstrate transcendence by training an autoregressive transformer to play chess from game transcripts, and show that the trained model can sometimes achieve better performance than all players in the dataset. We theoretically prove that transcendence is enabled by low-temperature sampling, and rigorously assess this experimentally. Finally, we discuss other sources of transcendence, laying the groundwork for future investigation of this phenomenon in a broader setting.”
“New York Governor Signs Bill Regulating Social Media Algorithms, In A US First” (CNN Business). “Big changes are coming for New York’s youngest social media users after Gov. Kathy Hochul signed two bills into law Thursday clamping down on digital platforms’ algorithms and use of children’s data. The unprecedented move makes New York the first state to pass a law regulating social media algorithms amid nationwide allegations that apps such as Instagram or TikTok have hooked users with addictive features. Hochul’s signature comes days after US Surgeon General Vivek Murthy called for warning labels to be applied to social media platforms, fueling a debate about social media’s potential impact on the mental health of users, particularly teens.”
“America's Middle Class Is Shrinking” (Newsweek). “America's middle class, traditionally considered the backbone of the nation and its economic engine, has been shrinking for the past 50 years, according to a recent Pew Research Center survey. A study based on government data released by the Washington-based nonpartisan fact tank in late May found that the share of Americans living in middle-class households dropped from 61 percent in 1971 to 51 percent in 2023. During the same time, the share of Americans living in lower income households rose from 27 percent to 30 percent, while that of individuals living in upper income households rose from 11 percent to 19 percent.”
What we’re reading (6/16)
“Investors Fear Long Stretch Of Calm in Markets Can’t Last” (Wall Street Journal). “Investors look sanguine, and analysts say they have good reason. The economy has remained stronger than almost anyone predicted after the Federal Reserve began raising interest rates. Corporate profits are rising again. Inflation cooled more than expected in last week’s consumer prices report, and Fed officials signaled that they expect to cut benchmark rates later this year.”
“What Is A ‘Zombie Mortgage’?” (New York Times). “For most buyers, mortgages are the cornerstone of purchasing a home. Sometimes a second mortgage is necessary, too, to cover the down payment, for instance. But what happens if that second mortgage seems to have been forgiven but actually still exists? Introducing: the ‘zombie mortgage.’ These aren’t creatures from the underworld, but mortgages that homeowners forgot about or lenders said they would write off, but didn’t, only to reappear years later, according to the Consumer Financial Protection Bureau.”
“The Media’s Role In Fracturing Sports” (Washington Post). “The pursuit of truth now competes with the desire for attention. It’s no contest, sadly. Instead of reporting, instead of wondering and scrutinizing, instead of building trust and gaining insight and providing context, we exhaust too many diminishing resources to facilitate screaming. There is seldom enough fresh information to react to, so we regurgitate arguments, only louder, all in the name of provocation.”
“Meta VPs Are Getting Squeezed Out Amid Mark Zuckerberg's ‘Permanent’ Efficiency Mode” (Business Insider). “As CEO Mark Zuckerberg makes what was a year of efficiency — in which more than 20,000 Meta employees were laid off — into a "permanent part" of how Meta operates, executives are not being shielded from tougher performance standards and ongoing reorganizations that are leading to incremental cuts to teams.”
“What Frank Lloyd Wright Tells Us About Late Bloomers” (Financial Times). “Many of Wright’s most significant buildings, including Fallingwater in Pennsylvania, the first Jacobs House in Wisconsin and the Guggenheim Museum, which still stands out futuristically in Manhattan, are the product of a late, unexpected period in his career. At 60, he was in decline; at 80, he was in the ascendant. He did more than half his work in the last quarter of his life. His final decade was his most productive. In other words, Wright was a late bloomer. Prior to his second act, he had been written off by an architecture establishment that could no longer see his potential. So many late bloomers hide in the open like this: among them Harry Truman, Margaret Thatcher and Katharine Graham. Jonathan Yeo, who produced the portrait of King Charles, only began to paint in his twenties. Penelope Fitzgerald wrote her first novel at 60. Young stars may be more visible, more celebrated, but late bloomers lurk among us.”
What we’re reading (6/15)
“The Good Economic News This Week Was Just That … Good News” (CNN Business). “When economic reports are released that are solid, they have all too often been clouded with concerns that good news for the economy actually means a longer wait before the Federal Reserve rolls out rate cuts. This week, a string of good news was actually good news: Closely watched inflation gauges showed prices had cooled more than anticipated; Americans’ financial outlooks were rosier than they have been in years while their inflation expectations dipped; and, on Friday, US import prices reversed course and fell sharply, adding fuel to the disinflationary fire.”
“Southwest Changed Flying. Now It Can’t Change Fast Enough.” (Wall Street Journal). “Elliott Investment Management, the influential New York hedge fund, says Southwest is stuck in the past. The activist investor says it has amassed a $1.9 billion stake, which amounts to an approximately 11% economic interest in the airline, making it one of Southwest’s biggest shareholders—and its most vocal critics. This past week it demanded Southwest oust its CEO, overhaul the board, and consider shaking up its business model. Southwest became the biggest U.S. airline by domestic passengers by doing things its own way. Trouble is, that’s no longer working so well.”
“The AI Bill That Has Big Tech Panicked” (Vox). “If I build a car that is far more dangerous than other cars, don’t do any safety testing, release it, and it ultimately leads to people getting killed, I will probably be held liable and have to pay damages, if not criminal penalties. If I build a search engine that (unlike Google) has as the first result for ‘how can I commit a mass murder’ detailed instructions on how best to carry out a spree killing, and someone uses my search engine and follows the instructions, I likely won’t be held liable, thanks largely to Section 230 of the Communications Decency Act of 1996. So here’s a question: Is an AI assistant more like a car, where we can expect manufacturers to do safety testing or be liable if they get people killed? Or is it more like a search engine?”
“How Jeff Bezos Is Trying To Fix The Washington Post” (New York Times). “Mr. Bezos, aware of the growing business problems, started paying more attention to his purchase last year. In June, the company announced that Fred Ryan, the chief executive since 2014, would be stepping down and that Patty Stonesifer, a veteran technology executive and a confidante of Mr. Bezos, would temporarily take over.”
“Wells Employees, So Adept At Forging Signatures And Altering Time Stamps Discover Power Automate” (Dealbreaker). “For years, Wells Fargo has been very clear: It does the screwing over of other people/places/things. It does not get screwed over itself! Not by its vendors, and certainly not by its employees. And yet those employees continue to (allegedly) find new ways to screw Wells Fargo over.”
What we’re reading (6/14)
“Hot Funds And The Curse Of ‘Self-Inflated Returns’” (Wall Street Journal). “What your exchange-traded fund owns is important. Who else owns your ETF might be even more important. That’s because a fund’s returns often don’t depend merely on the behavior of the investments it buys, but also on the behavior of the investors who buy the fund. Hot money—a sudden influx of cash from people trying to get rich quick—can overheat an ETF and create what new research calls ‘self-inflated returns.’ The result, sooner or later, is self-inflicted losses. Fortunately, you can protect yourself with some common sense.”
“Larry Summers Isn’t Second-Guessing The Government On Inflation” (New York Times). “Dissatisfaction with high interest rates and the unavailability of consumer credit explains why consumer sentiment is worse than would be expected given current levels of inflation and unemployment, Lawrence Summers, the former Treasury secretary and Harvard president, wrote in February in a working paper with three other economists…You might be surprised, then, that Summers is not arguing for the Bureau of Labor Statistics to put interest rates in the Consumer Price Index. ‘I don’t think the purpose of the C.P.I. is to predict people’s sentiment,’ he told me this week. ‘The purpose is to measure the cost of goods and services.’”
“Caught You Faking: Wells Fargo Firings Expose Workplace Surveillance Dilemma” (Axios). “Wells Fargo’s decision to fire more than a dozen employees for ‘simulation of keyboard activity’ points to a simmering tension in the post-pandemic workplace…Major employers are using surveillance tools to ensure that no matter where people work, they're at their computers — but polls suggest doing so is risky for morale…Wells Fargo didn't say whether the employees — from the company's wealth- and investment-management unit — were working remotely, or how they were faking the ‘impression of active work,’ Bloomberg reports.”
“Why The Stock Market Has Risen Even With No Fed Rate Cuts” (New York Times). “The Federal Reserve has disappointed investors this year, but no matter. The markets have adjusted. Even without any interest rate cuts so far in 2024 — and with the likelihood of just one meager rate reduction by the end of the year — the stock market has been purring along. That’s quite an achievement, given the expectation in January that the Fed would trim rates six or seven times in 2024 — and that interest rates throughout the economy would be much lower by now.”
“Roaring Kitty Becomes The 4th Largest GameStop Shareholder After Nearly Doubling His Position To 9 Million Shares” (Business Insider). “Keith Gill, better known as Roaring Kitty on social media, appears to have nearly doubled his position in GameStop stock. According to a screenshot of his E*Trade portfolio posted to Reddit on Thursday, Gill now owns nine million shares of GameStop. Gill had previously owned 5 million shares of GameStop and 120,000 call option contracts with a $20 strike price that were set to expire next week. With Gill's massive options position in the money, he partially sold the options and exercised some to acquire an additional 4 million shares at $20 each.”
What we’re reading (6/10)
“Apple Is Bringing One Of iPhone Owners’ ‘Most Requested’ Features To Text Messages” (Business Insider). “Apple’s iOS 18 update will come with the ability to schedule text messages to be sent at a later time, it announced Monday at its annual WWDC event. It’s among the ‘most requested’ features and can come in handy for things like sending a reminder or remembering to wish a friend happy birthday, Ronak Shah, Apple’s director of internet-technologies product marketing, said.”
“Gen Z Plumbers And Construction Workers Are Making #BlueCollar Cool” (Wall Street Journal). “Skepticism about the cost and value of four-year degrees is growing, and enrollment in vocational programs has risen as young people pursue well-paying jobs that don’t require desks or so much debt, and come with the potential to be your own boss. The number of students enrolled in vocational-focused community colleges rose 16% last year to its highest level since the National Student Clearinghouse began tracking such data in 2018.”
“A New Measure Shows C.E.O. Pay At Even More Astronomical Levels” (New York Times). “Twelve years after the enactment of Dodd-Frank, the Securities and Exchange Commission approved additional rules for assessing C.E.O. pay. Virtually all publicly traded companies have been subject to these ‘compensation actually paid’ rules this year. The new approach is supposed to help shareholders determine whether an executive’s compensation is aligned with their company’s stock market return. It emphasizes the annual changes in value of an executive’s current and potential stock holdings, in contrast with the traditional approach, which provides a snapshot of the estimated value of a pay package when it is granted.”
“OpenAI Hires New CFO And Product Chief, Announces Apple Deal To Integrate ChatGPT” (CNBC). “OpenAI on Monday hired two top executives and announced a partnership with Apple that includes a ChatGPT-Siri integration, the company announced in two blog posts. The company said Sarah Friar, previously CEO of Nextdoor and finance chief at Square, is joining as chief financial officer. Friar co-chairs the Stanford Digital Economy Lab. ‘She will lead a finance team that supports our mission by providing continued investment in our core research capabilities, and ensuring that we can scale to meet the needs of our growing customer base and the complex and global environment in which we are operating,’ OpenAI wrote in a blog post. OpenAI also hired Kevin Weil, an ex-president at Planet Labs, as its new chief product officer, according to the blog post.”
“Walmart Store Closures Are A Warning Sign Of Retail Apocalypse With Other Chains Also Facing Threat, Expert Says” (The U.S. Sun). “Walmart, which operates 5,000 stores in the US, is also reportedly laying off hundreds of corporate employees as the company urges remote workers to come into work. Retail analyst Neil Saunders told Yahoo that Walmart's closures in 2016, captured by retail photographer Nicholas Eckhart, were the beginning of a pattern in store cuts. ‘The blunt truth is that while stores remain a vital part of the retail mix, they are not quite as relevant as they used to be,’ the expert told the outlet.”
What we’re reading (6/9)
“A Crypto Bull’s Big Tax Settlement” (DealBook). “The attorney general for the District of Columbia has reached a $40 million settlement with the billionaire Bitcoin investor Michael Saylor and MicroStrategy, the software company he founded, over tax fraud, DealBook’s Lauren Hirsch is first to report. Officials say the agreement is the biggest-ever income tax fraud recovery in the district. It’s also the first lawsuit under the district’s amended False Claims Act, which encourages whistle-blowers to file claims of tax evasion against residents who they say are concealing where they actually live.”
“Colorado’s Weed Market Is Coming Down Hard And It’s Making Other States Nervous” (Politico). “What once was a success story has now left a trail of failed businesses and cash-strapped entrepreneurs in its wake. Regulatory burdens, an oversaturated market and increasing competition from nearby states have all landed major blows, leaving other states with newer marijuana markets scrambling to avoid the same mistakes.”
“A Researcher Fired By OpenAI Published A 165-Page Essay On What To Expect From AI In The Next Decade. We Asked GPT-4 To Summarize It.” (Business Insider). “Leopold Aschenbrenner, a researcher fired from OpenAI in April, published his thoughts on the AI revolution in an epic 165-page treatise…Aschenbrenner's essay doesn't appear to include sensitive details about OpenAI. Instead, as Aschenbrenner writes on the dedication page, it’s based on ‘publicly available information, my own ideas, general field knowledge, or SF gossip.’”
“Why You Shouldn’t Obsess About The National Debt” (Paul Krugman). “First, while $34 trillion is a very large figure, it’s a lot less scary than many imagine if you put it in historical and international context. Second, to the extent debt is a concern, making debt sustainable wouldn’t be at all hard in terms of the straight economics; it’s almost entirely a political problem. Finally, people who claim to be deeply concerned about debt are, all too often, hypocrites — the level of their hypocrisy often reaches the surreal.”
“Gold Is Getting Harder To Find As Miners Struggle To Excavate More, World Gold Council Says” (CNBC). “The gold mining industry is struggling to sustain production growth as deposits of the yellow metal become harder to find, according to the World Gold Council. ‘We’ve seen record first quarter mine production in 2024 up 4% year on year. But the bigger picture, I think about mine production is that, effectively, it plateaued around 2016, 2018 and we’ve seen no growth since then,’ WGC Chief Market Strategist John Reade said.”