What we’re reading (11/13)
“Inflation Stays Firm, But Not Enough To Derail December Fed Cut” (Wall Street Journal). “Consumer prices edged up in October after having recorded the slowest rate of growth in 3½ years in the previous month, a sign of how inflation continues to move lower on an uneven and bumpy path. The latest report likely wasn’t enough to derail another interest-rate cut from the Federal Reserve in December. But together with solid consumer spending and steady hiring, firmer inflation could kick off a bigger debate at officials’ next meeting over whether to slow the pace of rate cuts early next year.”
“October Inflation Data Meets Forecasts, Keeping Fed On Track For December Rate Cut” (Yahoo! Finance). “Notable callouts from the inflation print include the shelter index, which rose 4.9% on an unadjusted, annual basis, matching September's increase. The index rose 0.4% month over month after rising 0.2% in September. Shelter contributed to over 50% of the monthly increase in overall inflation, the BLS said. Sticky shelter inflation has largely been blamed for higher core inflation readings, according to economists. At Yahoo Finance's Invest conference on Tuesday, Minneapolis Fed president Neel Kashkari categorized housing inflation as ‘the big elephant that is still out there’ but did say he's confident price increases will slow as new leases are signed at lower rates.”
“Cryptocurrency’s Latest Disruption: A Dog Popularity Contest” (New York Times). “It sounds like a fun, friendly online competition. Some cute dogs are chosen, and the public votes for their favorites. At the end, one dog claims the top prize. So how did the Honorary NYC Dog Mayor Election of 2024 turn into a morass of ballot stuffing, vituperation and — ugh — cryptocurrency-influenced chicanery?”
“FBI Seizes Polymarket CEO’s Phone, Electronics After Betting Platform Predicts Trump Win: Source” (New York Post). “FBI agents raided the Manhattan apartment of Polymarket CEO Shayne Coplan early Wednesday morning — just a week after the election-betting platform successfully predicted Donald Trump’s stunning victory, The Post has learned. The 26-year-old entrepreneur was roused from bed in his Soho pad at 6 a.m. by US law enforcement who demanded he turn over his phone and other electronic devices, a source close to the matter told The Post.”
“A New Supersize Limit For Some 401(k) Contributions Hits In 2025: What You Need To Know” (USA Today). “A substantially higher "catch-up" contribution for 401(k) plans applies for savers aged 60, 61, 62 and 63 who participate in these plans at work beginning in 2025. For example, if someone is 59 in March but turns 60 in September 2025, according to the IRS, they could contribute up to the maximum of $34,750 in a 401(k) plan in 2025. For 2025, the higher catch-up contribution limit that applies to this age group is $11,250. That's $3,750 on top of the ordinary $7,500 catch-up limit that starts to apply in the year that a saver turns age 50. Catch-up contributions for those 50 and up have long been a way for some who can save more to get an extra boost in their later working years.”
What we’re reading (11/12)
“Red Lobster Is Bringing Back A Beloved Menu Item After Emerging From Bankruptcy” (CNN Business). “Hush puppies, once a staple on Red Lobster’s menu, are coming back. It’s part of broader changes at the chain, which recently emerged from bankruptcy and is now under the control of a 35-year-old CEO hoping to turn around the seafood restaurant chain’s fortunes. Rolling out this week is an overhauled menu that is 20% smaller but has nine new items, including the beloved cornmeal fritters.”
“OpenAI Is Reportedly Struggling To Improve Its Next Big AI Model. It’s A Warning For The Entire AI Industry.” (Business Insider). “OpenAI's next flagship artificial-intelligence model is showing smaller improvements compared with previous iterations, The Information reported, in a sign that the booming generative-AI industry may be approaching a plateau. The ChatGPT maker’s next model, Orion, showed only a moderate improvement over GPT-4, The Information said, citing some employees who have used or tested it. The leap in Orion has been smaller than that between GPT-3 and GPT-4, especially in coding tasks, the report added.”
“Mexico Signals It Could Hit Back At U.S. With Tariffs Of Its Own” (New York Times). “Mexico’s government on Monday signaled that it planned to hit back with trade restrictions of its own if President-elect Donald J. Trump followed through on his threats to impose sky-high tariffs on Mexican exports to the United States. ‘If you put 25 percents tariffs on me, I have to react with tariffs,’ Marcelo Ebrard, Mexico’s economy minister, told a radio interviewer on Monday. ‘Structurally, we have the conditions to play in Mexico’s favor,’ he added.”
“Saudi Arabian Megacity Neom Replaces Its CEO” (Semafor). “The longtime CEO of Saudi Arabia’s futuristic megacity Neom abruptly left his post, the latest setback for the world’s largest construction project. The departure of Nadhmi al-Nasr, who had led the project since 2018 and reportedly had an aggressive leadership style, marks a major shakeup at Neom, which is a showpiece of Riyadh’s ambition to diversify its economy and become a tourism and entertainment destination. Plans for Neom include a floating industrial city and alpine resort, but it has faced challenges in the last year including budget challenges, delays, and reports of worker deaths.”
“Real-Estate Scions Are Breaking A Cardinal Rule: Never Sell” (Wall Street Journal). “The office market’s severe downturn is forcing some of the city’s multigenerational family owners to do something they managed to avoid during world wars, financial meltdowns and a global pandemic: sell their core properties.”
What we’re reading (11/11)
“If Trump Tries To Fire Powell, Fed Chair Is Ready For A Legal Fight” (Wall Street Journal). “Alvarez, the Fed’s former general counsel, said he thinks Powell would win a legal challenge on the matter, in part because lawmakers who drafted and amended the law that created the Fed repeatedly debated and decided against including provisions that would allow the chair to be removed at will by the president. The Fed’s seven governors are appointed by the president to 14-year terms. They must be confirmed by the Senate. The law says they can only be removed for cause, which courts have interpreted to mean malfeasance or dereliction of duty. A separate law allows the president to designate one of the seven governors as Fed chair for a four-year term, also subject to Senate confirmation. The law is silent on whether the same dismissal standard applies.”
“BlackRock Plows $2 Billion Into Momentum Stocks After Election” (Bloomberg). “More than $1.9 billion flooded into the $13 billion iShares MSCI USA Momentum Factor ETF (ticker MTUM) on Friday, the biggest one-day flow since the fund’s 2013 launch, data compiled by Bloomberg show. At the same time, a record $1 billion exited from the $32.5 billion iShares Core Total USD Bond Market ETF (IUSB). A BlackRock spokesperson confirmed that the firm adjusted its model portfolio allocations last week.”
“What Science Reveals About Our Tendency Toward Corruption” (El Pais). “A year-long experiment was conducted at the self-service checkouts of a supermarket chain in Modena and Ferrara in Italy to test whether there was any link between corruption scandals and how honest consumers were with their shopping. Analyzing data from random checks on the supermarket carts, the researchers found that the probability of not declaring all the purchases increased by 16% to 30% after a local corruption scandal made headlines.”
“Icahn’s Private Hedge Fund Posts A Quarterly Gain — But Is Still In The Red” (Institutional Investor). “The octogenarian’s publicly traded investment firm, Icahn Enterprises, reported a 7.6 percent gain in its investments segment in the September three-month period. Even so, it remains down 1.9 percent for the year. This means Icahn lagged the S&P 500 by about 23 percentage points in the first nine months of 2024. Last year, the investments segment lost 16.9 percent, compared with a 26.3 percent jump for the S&P 500, including dividends reinvested — a lag of 40 percentage points.”
“Does Warren Buffett Know Something That We Don’t?” (Wall Street Journal). “When the world’s most-followed investor doesn’t feel comfortable investing, should the rest of us be worried? Warren Buffett, who has quipped that his favorite holding period for a stock is ‘forever,’ continues to have substantial money at work in American companies. But he has never taken this much off the table either—a whopping $325 billion in cash and equivalents, mostly in the form of Treasury bills.”
What we’re reading (11/4)
“What The Stock Market Typically Does After The U.S. Election, According To History” (CNBC). “Stocks typically rise after a presidential election, but investors need to be prepared for some short-term choppiness first, history shows. The three major benchmarks on average have seen gains between Election Day and year-end in the presidential election year going back to 1980, according to CNBC data. However, investors should not be expecting a straight shot up in the market after polls close.”
“The SALT Deduction Fight Is Coming Back—Whoever Wins The Election” (Wall Street Journal). “The cap, along with much of the 2017 tax law, expires at the end of 2025. This time, no matter who wins Tuesday, it will be a key piece of the tax fight. Cap opponents could have a leg up if lawmakers from New York, New Jersey and California hold a congressional balance of power in a slim majority for either party, commanding a large-enough faction to block bills that don’t address their concerns.”
“Warren Buffett’s Berkshire Hathaway Hoarded Cash, Sold Stocks, And Halted Buybacks Ahead Of The Election” (Business Insider). “Between July and September 30, Buffett’s company grew its mountain of cash, Treasury bills, and other liquid investments to an unprecedented $325 billion (or $310 billion, subtracting nearly $15 billion of payables for Treasury bill purchases). Two years ago, Berkshire had less than $110 billion in cash.”
“How Housing Market Is Mirroring 2007, According To New Report” (Newsweek). “‘The small, but noticeable uptick in new build purchases is more than likely the result of builders offering more aggressive incentives than other properties,’ Beene said. ‘Some builders have offered lower interest rates and prices to get buyers in the doors of new properties.’ Alan Chang, a title and escrow expert, echoed this statement, saying builders have had a big push to incentivize buyers with rate buy-downs or upgrades to ensure inventory is sold as soon as possible.”
“Americans Who Bought Homes In 2024 Were Older And Richer Than Ever” (CNN Business). “The survey found that first-time homebuyers had a median household income of $97,000, up from $95,900 last year, and the median age of first-time buyers rose to 38 years old, a new record high. A generation ago, a typical first-time homebuyer was in their late 20s, according to the report…Unlike most tax-policy disputes, the SALT cap breaks along regional lines, not just partisan ones.”
What we’re reading (11/3)
“Fed Prepares Rate Cut Amid Economic Contradictions” (Wall Street Journal). “Federal Reserve officials are expected to cut interest rates by a quarter percentage point at their meeting Thursday because inflation has continued to make progress toward their 2% goal. Officials began lowering rates at their previous meeting in September by making a larger half-point cut. They are trying to figure out where, exactly, rates should settle after high inflation over the past three years led to a dramatic series of rate increases.”
“The Economic Philosophy Of Donald Harris” (The New Yorker). “In the nineteen-seventies, Harris became the first tenured Black economist at Stanford. He taught courses in Marxian economics, which was then an active field of research, arguing that it provided a more useful framework for analyzing the long-term dynamics of capitalism—how economies grow and how wealth gets distributed—than the theories promulgated in standard textbooks and courses. Harris, in his 1978 book, which surveyed a number of different approaches to economic development, wrote that the Marxian system, though incomplete in some essentials, ‘remains today as a powerful basis on which to construct a theory of growth of the capitalist economy appropriate to modern conditions.’ Nevertheless, much of his own theoretical work emerged from a distinct but related intellectual tradition, the post-Keynesian school, which was originally associated with some left-leaning British followers of John Maynard Keynes. Harris extended the post-Keynesian approach to developing economies, and he argued that a key feature of capitalism as an economic system was ‘uneven development,’ both within and across countries.”
“TGI Fridays Files For Bankruptcy” (CNN Business). “TGI Fridays Inc., the American casual dining chain, filed for Chapter 11 bankruptcy protection Saturday. The company said in a statement that fallout from the Covid-19 pandemic was the ‘primary driver of our financial challenges’ and it will use the Chapter 11 process to ‘explore strategic alternatives in order to ensure the long-term viability of the brand.’”
“The Mysterious Fees Inflating Your Grocery Bill” (Wall Street Journal). “The price of a bag of coconut-cashew granola at Whole Foods jumped last year from $5.99 to $6.69. Why that happened defies simple explanation. The granola maker, Wildway Foods, said the cost of making the cereal hasn’t gone up that much, and that it isn’t pocketing more profit. It jacked up the price, it said, in large part to offset fees that piled up from a little-known link in the supply chain: grocery distributors. There were charges for processing grocery promotions, others for potential spoilage and still more related to alleged shipping glitches.”
“DJT Stock’s Sudden Crash Wipes Out $2.4 Billion From Donald Trump’s Wealth In Just 3 Days” (Fortune). “The recent collapse in shares of Trump Media and Technology Group, the parent company of Truth Social, has ravaged Donald Trump’s net worth. He owns the majority of its shares, which trade under the ticker DJT, and the stock has been a barometer of the former president's prospects this election cycle. It soared as polls began tilting his way through most of October.”
What we’re reading (11/1)
“NVIDIA And Sherwin-Williams Set To Join Dow Jones Industrial Average; Vistra To Join Dow Jones Utility Average” (S&P Global). “NVIDIA Corp. (NASD:NVDA) will replace Intel Corp. (NASD:INTC), and The Sherwin-Williams Co. (NYSE:SHW) will replace Dow Inc. (NYSE:DOW) in the Dow Jones Industrial Average. The index changes were initiated to ensure a more representative exposure to the semiconductors industry and the materials sector respectively. The DJIA is a price weighted index, and thus persistently lower priced stocks have a minimal impact on the index. Dow Inc. is also the smallest company in the DJIA as measured by company market capitalization.”
“Big Tech Workers Got Too Used To Perks. The Pampering Is Over.” (Business Insider). “Cost-cutting, huge layoffs, and the use of AI have put tech employers in a more powerful position. Hiring has also slowed, with tech job postings about 30% below pre-pandemic levels, the job site Indeed said. That, in turn, means employers can provide fewer perks.”
“Corporations Face Reversal Of Fortune As 2025 Tax Debate Heats Up” (Politico). “Corporations were among the biggest winners when Republicans pushed through sweeping tax cuts in 2017, getting a whopping 14-percentage point cut in their tax rate. But with lawmakers facing intense pressure to extend trillions in tax cuts next year that mostly benefit individual Americans, both Republicans and Democrats see corporations as a potential piggy bank to cover the huge hit to the budget.”
“A Luxury Giant, A Reclusive Heir And The Case Of The Missing $13 Billion” (Wall Street Journal). “Puech, who is 81 years old and doesn’t have any children, is in the newspapers due to a stunning claim he made last year: He said he was out of money. As for his stake in Hermès, the luxury giant controlled by his family, he said he didn’t own the shares anymore, and he didn’t know who did. It’s a mystery tale that could only unfold among the ultrawealthy, in the opulent settings of Italian palazzos and sprawling chalets in the Alps. At stake are 6 million shares in an iconic luxury brand famed for its colorful silk scarves and Birkin and Kelly handbags cherished by socialites. A massive inheritance that was once earmarked for philanthropy now could be lost forever.”
“Monkeys Will Never Type Shakespeare, Study Finds” (BBC). “Two Australian mathematicians have called into question an old adage, that if given an infinite amount of time, a monkey pressing keys on a typewriter would eventually write the complete works of William Shakespeare. Known as the "infinite monkey theorem", the thought-experiment has long been used to explain the principles of probability and randomness. However, a new peer-reviewed study led by Sydney-based researchers Stephen Woodcock and Jay Falletta has found that the time it would take for a typing monkey to replicate Shakespeare's plays, sonnets and poems would be longer than the lifespan of our universe.”
November picks available now
The new Prime and Select picks for November are available starting now, based on a model run put through Today (October 31). As a note, I will be measuring the performance on these picks from the first trading day of the month, Friday, November 1, 2024 (at the mid-spread open price) through the last trading day of the month, Friday, November 29, 2024 (at the mid-spread closing price).
November picks available soon
I’ll be publishing the Prime and Select picks for the month of November before Friday, November 1 (the first trading day of the month). As always, SPC’s performance measurement for the month of October, as well as SPC’s cumulative performance, will assume the sale of the October 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, October 31). Performance tracking for the month of November will assume the November 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 (Friday, November 1).
What we’re reading (10/28)
“The Hard Truth: Americans Don’t Trust The News Media” (Jeff Bezos, Washington Post). “In the annual public surveys about trust and reputation, journalists and the media have regularly fallen near the very bottom, often just above Congress. But in this year’s Gallup poll, we have managed to fall below Congress. Our profession is now the least trusted of all. Something we are doing is clearly not working. Let me give an analogy. Voting machines must meet two requirements. They must count the vote accurately, and people must believe they count the vote accurately. The second requirement is distinct from and just as important as the first…Likewise with newspapers. We must be accurate, and we must be believed to be accurate. It’s a bitter pill to swallow, but we are failing on the second requirement…Presidential endorsements do nothing to tip the scales of an election. No undecided voters in Pennsylvania are going to say, ‘I’m going with Newspaper A’s endorsement.’ None. What presidential endorsements actually do is create a perception of bias.”
“Economists Warn Of New Inflation Hazards After Election” (Wall Street Journal). “A punishing 2½-year fight to bring inflation down appears to be succeeding. The election could change that. Inflation has fallen thanks to higher interest rates and big assists from healed supply chains and an influx of workers. But whether borrowing costs and price growth continue to ease next year could turn heavily on policy choices by Donald Trump or Kamala Harris.”
“Partner Pay At Big 4 Firms Is Dropping, The Latest Sign Of The Consulting Slowdown” (Business Insider). “Partner payouts at the Big Four consultancies are falling as demand for professional services declines and firms increase the number of partners. At EY, partner payouts in the UK, where the global consulting and accountancy firm is headquartered, were down by 5% this year.”
“Who Says Another Google Is Coming?” (Freddie DeBoer). “The trouble is that there hasn’t been a new Google or Facebook since Google and Facebook. There’s been plenty of profitable new companies, mind you. Uber has gotten rolled up into many people’s conceptions of huge successful Silicon Valley firms, and setting aside any questions about their business model, it’s true that the company has grown quite large. But large is relative; Uber’s market cap is less than 10% of Google’s. And besides, it’s too late to get in early on Uber. The company will be old enough to drive next year. (See what I did there?) There simply hasn’t been any success stories on the scale of Google and Facebook since. A lot of profitable new firms, meanwhile, aren’t sexy in the way tech firms are perceived to be sexy. Dirt-cheap Chinese clothing company Shein was a darling for awhile, but it’s a clothing company. They sell people physical goods. Not sexy! Stripe, Zoom, Slack - potentially sexy, to a certain kind of person, but nobody’s 100x’d their money. Now that the party’s over and the Fed’s free beer era is over, the macro conditions are putting more and more of a squeeze on potential startups - it’s much more expensive to borrow and there’s less incentive for investors to chase moonshots. So your idea has to look really impressive.”
“Scale And Scope In Early American Business History: The ‘Fortune 500’ Of 1812” (SSRN). “Fortune magazine began publishing annual rankings of U.S. corporations by revenue in 1955. Ever since, scholars and forecasters have analyzed changes in the Fortune 500 to help inform their judgments about industry concentration and the relative importance of different sectors of the economy. Unfortunately, earlier data are scarce, especially before the Civil War. Through extensive research we have created a sort of historical ‘Fortune 500’ going back to 1812, ranked by corporate capitalization, which we share here. Numerous insights can be drawn from this dataset, including the historical dominance of the banking and finance sectors and the early importance of manufacturing. Perhaps the larger significance of being able to come up with a Fortune 500 for 1812, though, is the fact that even with a population of only about 7.5 million, U.S. already had more business corporations than any other country, and possibly more than all other countries put together, securing its role as the world’s first ‘corporation nation.’ The ease of incorporating businesses released a lot of entrepreneurial energy that helped to build an ever-expanding economy and by the end of the 19th century, the U.S. would be the world’s largest national economy with tens of thousands of corporations.”
What we’re reading (10/26)
“How Gold Became One Of The World's Hottest Investments” (Business Insider). “The price of gold has soared this year. The precious metal hit a record high of $2,772 per troy ounce this week and has risen in six of the past seven weeks. With year-to-date gains of about 33%, gold returns have outpaced the broader stock market, including the tech-heavy Nasdaq 100, by about 10 percentage points. And since the bull market in stocks began in October 2022, gold has outpaced equity gains, returning 67% compared to the S&P 500's return of about 63%, according to data from YCharts.”
“Bond Trading Frenzy Risks Giving Market Makers A False Sense Of Security” (Bloomberg). “On the surface, the corporate bond market has never looked more stable and liquid. In the US, the market recorded its busiest month ever for trading volume in September. But history suggests that the ability to trade smoothly is only there until you need it, and the International Monetary Fund warned this week that tight spreads are raising the risk of an abrupt repricing of credit.”
“In This Election Cycle, ‘Bond Vigilantes’ Are Voting Too—And They Don’t Like What They See” (Fortune). “Suburban moms, crypto bros, and Swifties aren't the only voters making their presence felt this election season. Bond investors are voting with their dollars in financial markets, and they don't like what they see. ‘In exit polls, the Bond Vigilantes are saying they are voting against Fed Chair Jerome Powell’s dovish monetary policy because the economy is running hot, and the Fed’s premature 50bps rate cut on September 18 raises the risk that it will overheat,’ they said.”
“Pfizer’s Activist Battle Might Fizzle—But Its Stock Probably Won’t” (Wall Street Journal). “For Pfizer Chief Executive Officer Albert Bourla, the activist campaign launched by Starboard Value marks a pivotal moment in his career. For shareholders, the activist push is largely a distraction as the pharmaceutical company has limited options to implement immediate changes that would drive significant growth. That doesn’t mean investors should abandon hope in the stock, though.”
“The Uneven Effects Of AI On The American Economy” (Marginal Revolution). “To see how this is likely to play out, start with a distinction between sectors in which it is relatively easy to go out of business, and sectors in which it is not. Most firms selling computer programming services, for example, do not typically have guaranteed customers or revenue, at least for long. Employees have to deliver, or they and their company will be replaced. The same is true of most media companies: If they lose readers or customers, their revenue disappears. There is also relatively free entry into the sector in the US, due to the First Amendment. Another set of institutions goes out of business only slowly, if at all. If a major state university does a poor job educating its students, for example, enrollment may decline. But the institution is still likely to be there for decades more. Or if a nonprofit group does a poor job pursuing its mission, donors may not learn of its failings for many years, while previous donors may pass away and include the charity in their wills. The point is, it can take a long time for all the money to dry up. Which leads me to a prediction: Companies and institutions in the more fluid and competitive sectors of the economy will face heavy pressure to adopt AI. Those not in such sectors, will not.”
What we’re reading (10/25)
“The Stock Market Enters The Danger Zone” (Barron’s). “Investors were disappointed by a mixed week for the stock market. They could look back longingly on it if everything goes wrong over the next couple of weeks…Economically sensitive stocks took the worst hit. Retail, banking, and industrial stocks all fell between 2% and 3%, and it appeared that investors were simply taking profits after the S&P 500 entered this past week up 23% in 2024.”
“France’s Financial Morass Produces A Harsh Critique From Moody’s (New York Times). “France has become one of the most financially troubled countries in Europe, with a ballooning debt and deficit. The European Commission has threatened sanctions, including enforced limits on spending, for breaching the bloc’s fiscal discipline rules.”
“NASA Head: Matt Damon’s Potato Farm On Mars Isn’t ‘Too Far Off’” (Semafor). “Elon Musk isn’t the only one with Mars dreams. NASA Administrator Bill Nelson predicted that humans will travel to the planet for the first time in the 2040s. ‘We are getting everything we need to know about how to sustain human life in that very hostile atmosphere,’ Nelson said during Semafor’s World Economy Summit in Washington, DC on Friday, adding that while it takes humans less than a week to travel to the moon, it would take months to travel to Mars. ‘Matt Damon showed us that we can raise potatoes on Mars,’ he joked, referencing the actor’s hit 2015 film The Martian. ‘That’s not too far off, by the way. I have actually seen plants growing in lunar soil that we brought back a half a century ago.’”
“Silicon Valley’s Elite Pour Money Into Blotting Out The Sun” (Bloomberg). “Venture capitalists, startup founders and tech executives are funding studies, experiments and small deployments of controversial technology that could cool the planet.”
“JPMorgan Is Boosting Its Junior-Banker Ranks” (Business Insider). “JPMorgan Chase is amid an off-cycle hiring spree for junior investment bankers, according to people familiar with the bank's recruitment efforts and to its online jobs board. The bank recently rolled out parameters to protect its analysts and associates from burnout and reported a big jump in its dealmaking fees.”
What we’re reading (10/24)
“How Intel Got Left Behind In The A.I. Chip Boom” (New York Times). “In 2005, there was no inkling of the artificial intelligence boom that would come years later. But directors at Intel, whose chips served as electronic brains in most computers, faced a decision that might have altered how that transformative technology evolved. Paul Otellini, Intel’s chief executive at the time, presented the board with a startling idea: Buy Nvidia, a Silicon Valley upstart known for chips used for computer graphics. The price tag: as much as $20 billion…As [Intel’s’ valuation has sunk, some big tech companies and investment bankers have been considering what was once unthinkable: that Intel could be a potential acquisition target.”
“New ‘Call Of Duty’ Tests Microsoft’s $75 Billion Bet On Future Of Videogames” (Wall Street Journal). “The tech giant’s acquisition of Activision Blizzard, the biggest deal in its history, was a wager on the future of how people will access and pay for videogames. Microsoft sought to position itself as a disrupter, believing the streaming revolution would migrate from television and film toward a growing, interactive medium with billions of rabid fans.”
“Capri Stock Craters 46% After Judge Blocks $8.5 billion Tapestry Deal” (Yahoo Finance). “Tapestry and Capri had announced their proposed merger last year. The combination would have brought together six high-profile fashion brands under one roof: Tapestry’s Coach, Stuart Weitzman, and Kate Spade with Capri’s Versace, Jimmy Choo, and Michael Kors.”
“Paul Singer Settles For Torturing Southwest CEO Rather Than Firing Him” (Dealbreaker). “Unlike former Starbucks CEO Laxman Narasimhan (and his outgoing chairman, Gary Kelly, who’s now stepping down next month as opposed to next year), Southwest Airlines CEO Robert Jordan gets to keep his job. This is because his board of directors, faced with a do-or-die showdown with activist hedge fund Elliott Management in early December at which Elliott would seek to fire eight of its members, at last—like so many others before it—recognized the folly of playing chicken with Elliott chief Paul Singer and gave him five seats. Whether Jordan will ultimately want to keep that job is another matter. Elliott has accused him of presiding ‘over a period of stunning underperformance’ and being ‘incapable of delivering on Southwest’s potential’[.]”
“Painting By AI Robot Ai-Da Could Bring More Than $120,000 At Sotheby’s” (The Art Newspaper). “Sotheby’s will sell its first work credited to a humanoid robot using artificial intelligence (AI) later this month. A.I. God. Portrait of Alan Turing (2024) was created by Ai-Da Robot, the artist robot and brainchild of Oxford gallerist Aidan Meller. ‘What makes this work of art different from other AI-generated works is that with Ai-Da there is a physical manifestation, and this is the first time a work from a robot of this type has ever come to auction,’ Meller told CBS MoneyWatch, which first reported the sale.”
What we’re reading (10/23)
“Surge In Treasury ‘Term Premium’ Warns Of Rising Bond Risks” (Bloomberg). “The US Treasury market, already mired in one of its worst losing stretches of the year, is flashing a fresh warning sign of mounting risks as yields surge.”
“‘Back to Starbucks’ Could Have A Retro Feel—And Valuation” (Wall Street Journal). “A reset might help Starbucks get its mojo back but, even if it rights the ship, it probably can’t grow at that pace again, and that should be reflected in its share price. Back in 1998, Starbucks was already so ubiquitous that the Onion ran a satirical story with the headline ‘New Starbucks Opens in Restroom of Existing Starbucks.’ Yet it had fewer than 2,500 stores at the time. Today it has three times as many in China alone, a market it was just entering, and about 40,000 worldwide.”
“The US Is Facing A Drugstore Graveyard As Stores Close. Filling The Leftover Spaces Is The Next Challenge.” (Business Insider). “Thousands of drugstores are expected to close over the next several years, including CVS, Walgreens, and Rite Aid stores. Walgreens CEO Tim Wentworth said in June that the retail pharmacy industry was ‘largely overbuilt for where the future was going to be.’”
“OpenAI Hires Former White House Official As Its Chief Economist” (New York Times). “The addition of a chief economist is indicative of OpenAI’s enormous ambition and where its executives see their company in the tech industry’s pecking order. Silicon Valley giants like Google and Facebook hired seasoned economists early in their transformations from promising start-ups into trillion-dollar companies whose technologies changed global markets.”
“Cash-Strapped Colleges Are Selling Their Prized Art And Mansions” (Bloomberg). “Selling cherished assets is a tricky calculus. While the funds generated can provide immediate relief, the effect of the disposals may hurt schools’ appeal, ultimately deepening their plight without even solving structural issues. After all, these sales don’t lead to a steady stream of revenue they can rely on, said Emily Raimes, a higher education analyst for Moody’s Ratings.”
What we’re reading (10/22)
“Peter Todd Was ‘Unmasked’ As Bitcoin Creator Satoshi Nakamoto. Now He’s In Hiding” (Wired). “When Canadian developer Peter Todd found out that a new HBO documentary, Money Electric: The Bitcoin Mystery, was set to identify him as Satoshi Nakamoto, the creator of Bitcoin, he was mostly just pissed. ‘This was clearly going to be a circus,’ Todd told WIRED in an email…The search for the creator of Bitcoin has dragged into its orbit a colorful cast of characters, among them Hal Finney, recipient of the first ever bitcoin transaction; Adam Back, designer of a precursor technology cited in the Bitcoin white paper; and cryptographer Nick Szabo, to name just a few. Journalists at Newsweek, the New York Times, and WIRED, among others, have all taken stabs at solving the Satoshi riddle. But irrefutable proof has never been unearthed.”
“The Quarter-Trillion Dollar Rush To Get Money Out Of China” (Wall Street Journal). “Chinese residents have been illicitly moving billions of dollars out of the country under authorities’ noses as a cratering property market and economic uncertainties push people to find safer places to park their wealth overseas.”
“Bed Bath & Beyond Stores Are Back From The Grave. Sort Of.” (Washington Post). “Bed Bath & Beyond seems to be the brand with more lives than an adventurous feline. Over the past 18 months, the retailer — once known for its sprawling stores stacked high with air fryers, trash cans and bedding — has gone through Chapter 11 bankruptcy, store closures, layoffs, liquidation, a new owner of its brand, a website relaunch and a new chief executive. Now the retailer is going back to its roots and opening a handful of small-format brick-and-mortar stores, according to parent company Beyond.”
“Inside The Bungled Bird Flu Response, Where Profits Collide With Public Health” (Vanity Fair). “When dairy cows in Texas began falling ill with H5N1, alarmed veterinarians expected a fierce response to contain an outbreak with pandemic-sparking potential. Then politics—and, critics says, a key agency’s mandate to protect dairy-industry revenues—intervened.”
“E. Coli Outbreak Linked To McDonald’s Quarter Pounders” (Centers for Disease Control and Prevention). “CDC, FDA, USDA FSIS, and public health officials in multiple states are investigating an outbreak of E. coli O157:H7 infections. Most people in this outbreak are reporting eating the Quarter Pounder hamburger at McDonald’s before becoming sick. It is not yet known which specific food ingredient is contaminated. McDonald’s is collaborating with investigation partners to determine what food ingredient in Quarter Pounders is making people sick. McDonald’s stopped using fresh slivered onions and quarter pound beef patties in several states while the investigation is ongoing to identify the ingredient causing illness.”
What we’re reading (10/21)
“The S&P 500’s Golden Decade Of Returns Is Over, Goldman Says” (Business Insider). “The stock market's decadelong golden age will soon be a thing of the past, Goldman Sachs said. A new report from the firm's portfolio-strategy research team forecast that the S&P 500 would see an annualized nominal return of 3% over the next 10 years. That would put it in the 7th percentile of performance since 1930. It would also badly lag the 13% annualized figure put up by the benchmark index over the prior decade, Goldman data showed…market concentration is near its highest level in 100 years, Goldman said.”
“Activist Urges Cheesecake Factory To Consider Breakup” (Wall Street Journal). “An activist investor has built a position in Cheesecake Factory and is urging the restaurant operator to spin off three of its smaller brands into a separate public company, according to people familiar with the matter.”
“Money Market Rates Are Lower, Yes. But Compared To What?” (New York Times). “Hundreds of billions of dollars flowed into the funds, which swelled in size month after month. Now that the Federal Reserve has begun cutting short-term interest rates — and money market funds have begun reducing their rates, too — you may expect that these funds would be less appealing. But nothing could be further from the truth. The “wall of cash” in money market funds isn’t flowing into the stock market or other risky investments. It is, for the most part, staying where it is — and growing larger.”
“Here’s One Economic Message From The Costco Gold Bar Craze” (Yahoo! Finance). “The wildly popular Costco bullion was introduced to warehouse club members last year via 24-karat 1 oz bars. The product has flown off the shelves, with Costco raking in a reported $200 million per month in gold bar sales. Demand has been so great that the retailer has begun to offer platinum bars.”
“Chick-Fil-A Is Releasing Its Own Entertainment App, With Family-Friendly Shows And Podcasts” (CNBC). “Chicken sandwiches, waffle fries, milkshakes – and now TV shows and podcasts? Chick-fil-A plans to launch a new app on Nov. 18, with a slate of original animated shows, scripted podcasts, games, recipes and e-books aimed at families. While it’s an unusual move for a restaurant company to wade into the crowded media world, Chick-fil-A has been expanding outside of food for years already — with the ultimate goal of directing more people to its over 3,000 restaurants.”
What we’re reading (10/20)
“They Are Basking In America’s Oil Boom—And Preparing For The Big Bust” (Wall Street Journal). “The history of oil is littered with cities that sprang up practically overnight and just as quickly crumbled. Scars from decades-old downturns are still etched into the collective memory of the mostly small towns speckling the Permian Basin that straddles West Texas and New Mexico.”
“Costco Has A Magazine And It’s Thriving” (New York Times). “Each month, 15.4 million copies of Costco Connection are mailed out to members. Another 300,000 are distributed via Costco warehouses. It is now the nation’s third largest magazine.”
“Wall Street’s Scrappy Underdog Has An Ambitious Plan To Make It Big” (Wall Street Journal). “Many investment banks thinned their ranks as dealmaking sputtered in the past few years. Jefferies took the opposite approach. The bank is spending hundreds of millions of dollars to lure top bankers from competitors. The goal: become the world’s fifth-largest investment bank and maintain the spot year after year.”
“Halloween Could Taste Different This Year Thanks To Soaring Cocoa Prices” (CNN Business). “Everybody knows it’s not Halloween without candy, but trick-or-treaters might find less chocolate filling their buckets this year. That’s because cocoa prices have more than doubled since the start of the year and have remained at record highs, according to Wells Fargo data shared with CNN.”
“What It’s Like To Work On A Megayacht” (The Cut). “[N]ot that many celebrities own yachts, actually. Their net worth aren’t high enough. Yacht-owning money is next level. Yachts are so expensive that most of the owners are just businessmen you’ve never heard of. You couldn’t tell them apart from some other grandpa. I definitely had celebrity guests from time to time, but they were always friends of the owner or charter guest.”
What we’re reading (10/19)
“Boeing, Union Reach Wage Deal To End Strike” (Wall Street Journal). “The company is offering a 35% wage increase over four years in its latest proposal. That is up from its original offer of 25% that was overwhelmingly rejected by a union local representing machinists in the Pacific Northwest who build most of Boeing’s jets.”
“The Secretive Dynasty That Controls The Boar’s Head Brand” (New York Times). “In May 2022, the chief financial officer of Boar’s Head, the processed meat company, was asked a simple question under oath. ‘Who is the C.E.O. of Boar’s Head?’ ‘I’m not sure,’ he replied. ‘Who do you believe to be the C.E.O. of Boar’s Head?’ the lawyer persisted. The executive, Steve Kourelakos, who had worked at the company for more than two decades and was being deposed in a lawsuit between owners, repeated his answer: ‘I’m not sure.’ It is odd, to say the least, when a top executive of a company claims not to know who his boss is.”
“Global Government Debt To Surpass $100 Trillion For The First Time” (Semafor). “Global public debt will exceed $100 trillion this year for the first time, and will likely continue to rise from there. A new International Monetary Fund report showed that government borrowing will reach 93% of global GDP by the end of the year and near 100% by 2030 — exceeding a pandemic-era peak of 99%, and 10 percentage points up from 2019.”
“Netflix Keeps Getting Sued Over True-Crime Shows. It’s Thirsty For More.” (Business Insider). “Netflix's thirst for crime fare…shows no sign of letting up, according to Business Insider's interviews with agents and producers, as well as commissioning data from Ampere Analysis.”
“What’s In The Water? Long-Run Effects Of Fluoridation On Health And Economic Self-Sufficiency” (Adam Roberts, Journal of Health Economics). “Community water fluoridation has been named one of the 10 greatest public health achievements of the 20th century for its role in improving dental health. Fluoride has large negative effects at high doses, clear benefits at low levels, and an unclear optimal dosage level. I leverage county-level variation in the timing of fluoride adoption, combined with restricted U.S. Census data that link over 29 million individuals to their county of birth, to estimate the causal effects of childhood fluoride exposure. Children exposed to community water fluoridation from age zero to five are worse off as adults on indices of economic self-sufficiency (−1.9% of a SD) and physical ability and health (−1.2% of a SD). They are also significantly less likely to graduate high school (−1.5 percentage points) or serve in the military (−1.0 percentage points). These findings challenge existing conclusions about safe levels of fluoride exposure.”
What we’re reading (10/18)
“Are Reports Of Small-Cap Stocks’ Revival Prospects Premature?” (The Capital Spectator). “The rally in recent days of the Russell 2000 Index, a widely followed benchmark of small-cap shares, has revived hope anew that this slice of the equity market is finally set to recover after a long stretch of underperformance. But we’ve been here before, multiple times in recent years. Is this time different? Maybe, but the evidence is still a bit thin.”
“Would A Time Machine Make You A Great Investor?” (Wall Street Journal). “The latest is the ‘Crystal Ball Trading Game.’ Players are given $1 million in play money and are shown 15 Journal front pages following big economic news randomly selected over the past 15 years. With up to 50 times leverage, multiplying that pot of money sounds like shooting fish in a barrel. Yet it wasn’t, and many players instead shot themselves in the foot. Through Thursday, more than 8,000 mostly financially savvy players had taken a crack at the game. Their median ending wealth after 15 rounds was just $687,986 according to data provided by Elm. Many lost everything.”
“Wait, Are Millennials Suddenly The Wealthiest Generation?” (Washington Post). “For decades — dating back to when boomers themselves were hard(ish)-rocking, penniless rebels — the Fed, with the help of NORC at the University of Chicago, has asked Americans about their balance sheets, surveying anything from antique collections to gambling activities, from life insurance policies to home equity. In the past, this once-every-three-years survey held discouraging news for millennials. After adjusting for inflation, their wealth lagged behind where their Gen X and boomer parents had been at the same age. But when we incorporated the latest survey, conducted in 2022, we were shocked to see millennials had taken the lead. And home equity seems to have emerged as the wealth-creation hero. The eldest millennials — now in their early 40s, old enough to sue for age discrimination — boast about twice the median home equity a Gen Xer did at that age. They also enjoy a substantial lead over boomers.”
“Walmart Confirms Robots Will Run ‘Ghost Kitchens’ Inside ‘Test’ Locations And You Can Already Order Your Coffee” (The U.S. Sun). “The automated beverage system is projected to serve between 100 and 200 cups of coffee and tea each day. It is also set to appear in a new location in Peachtree, Georgia, opening this year. However, the new agreement between Richtech Robotics and Ghost Kitchens America extends its operations to 20 additional Walmart locations. Ghost Kitchens America CEO George Kottas said he hoped the decision would drive between $700,000 and $2 million in annual revenue at each location.”
“Electric Motors Are About to Get A Major Upgrade Thanks To Benjamin Franklin” (Wall Street Journal). “A handful of scientists and engineers—armed with materials and techniques unimaginable in the 1700s—are creating modern versions of Franklin’s ‘electrostatic motor,’ that are on the cusp of commercialization. It’s reminiscent of the early 1990s, when Sony began to produce and sell the first rechargeable lithium-ion batteries, a breakthrough that’s now ubiquitous.”
What we’re reading (10/14)
“The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2024” (Royal Swedish Academy of Sciences). “This year’s laureates in the economic sciences – Daron Acemoglu, Simon Johnson and James Robinson – have demonstrated the importance of societal institutions for a country’s prosperity. Societies with a poor rule of law and institutions that exploit the population do not generate growth or change for the better. The laureates’ research helps us understand why.”
“Acemoglu, Johnson And Robinson Win Nobel Prize For Institutions And Prosperity” (Marginal Revolution). “One interesting aspect of this year’s Nobel is that almost all of AJRs Nobel work is accessible to the public because it has come primarily through popular books rather than papers. The Economic Origins of Dictatorship and Democracy, Why Nations Fail, and the The Narrow Corridor all by Acemoglu and Robinson and Power and Progress by Acemoglu and Johnson are all very readable books aimed squarely at the general public. The books are in many ways deeper and more subtle than the academic work which might have triggered the broader ideas (such as the famous Settler Mortality paper). Many of the key papers such as Reversal of Fortune are also very readable.”
“The Economist Whose Contrarian Streak Has Gotten Attention In Biden And Trump Camps” (Wall Street Journal). “Michael Pettis, a professor of finance at Peking University, has spent two decades in China observing its breakneck economic ascent and its impact around the world. Among his conclusions: He thinks former President Trump’s plan for across-the-board import tariffs isn’t a bad idea. He also says the U.S. should use capital controls to discourage China and other high-saving nations from snapping up treasuries, stocks and other American assets.”
“Anthropic CEO Goes Full Techno-Optimist In 15,000-Word Paean To AI” (TechCrunch). “In broad strokes, Amodei paints a picture of a world in which all AI risks are mitigated, and the tech delivers heretofore unrealized prosperity, social uplift, and abundance. He asserts this isn’t to minimize AI’s downsides — at the start, Amodei takes aim, without naming names, at AI companies overselling and generally propagandizing their tech’s capabilities. But one might argue that the essay leans too far in the techno-utopianist direction, making claims simply unsupported by fact.”
“Prince Harry Says The Smartphone Is ‘Stealing Young People’s Childhood’” (Vanity Fair). “For World Mental Health Day, Prince Harry interviewed a researcher who helped inspire Harry and Meghan Markle’s work on online safety.”
What we’re reading (10/13)
“The Market Has Been Fabulous, Maybe Excessively So” (New York Times). “Consider how powerful the U.S. stock market rally has been. The S&P 500, the most widely followed U.S. stock market benchmark, rose 5.9 percent for the quarter and 22 percent since the start of the year through September, including dividends. In the 12 months through September, it returned a sizzling 34.2 percent. That’s more than triple the average annualized return of 10.5 percent since 1926.”
“Fate Of Lina Khan’s Bid To Reshape Antitrust Comes Down To Election” (Wall Street Journal). “Whether Khan sticks around is more of an open question. Khan would be open to remaining atop the FTC if Harris wins, according to a person familiar with her thinking. Harris has ties to the country’s biggest corporate law firms, whose merger departments feed on the flow of deals brokered by investment banks. Some investors, such as Reid Hoffman, have also said Khan’s antimerger bent hurts innovation. Hoffman, the founder of LinkedIn and a major Democratic donor, said this summer that Khan should be replaced if Harris wins the White House.”
“OpenAI Must Scale A Massive Money Mountain” (Spyglass). “OpenAI is clearly very good at fundraising. Understatement of the century, thus far? But a lot can happen between now and 2028. An in AI, where the days feel more like months, even more is unknown. That's a massive risk, to put it lightly. Of course, they'll have levers they can pull to dial down burn, in particular with compute. But there's also a chance they'd have to dial it up as well. It's just a complete unknown at this point. It does feels like it will be hard for any other startup to compete with such cash needs – Anthropic, answer your phone, Amazon is calling – but OpenAI will be competing with Google, Meta, and all the rest of Big Tech. Maybe not Apple. But probably them too, eventually.”
“Just How Doomed Is Home Insurance?” (Vox). “Home insurance premiums are rising across the country. Florida homeowners already pay the highest rates, on average about $3,600 per year, according to the Florida Office of Insurance Regulation, well above the national average of around $2,400 per year. Across Florida’s 10 largest cities, rates are more than $10,000 per year, according to a report from Insurify. Last year, US home insurance rates jumped 11.3 percent on average, which has led some to drop their coverage altogether. Some Floridians have seen rate hikes as high as 400 percent over the past five years. That’s if they can find insurance at all. Hundreds of thousands of Americans have come home to a breakup letter from their private insurers, canceling their coverage.”
“America’s New Millionaire Class: Plumbers And HVAC Entrepreneurs” (Wall Street Journal). “Aaron Rice has two logos tattooed on his left leg: one from the plumbing business he co-founded more than a decade ago, and another from the private-equity-backed company that recently bought it. Few businesses are as vital to their customers as local plumbing, heating or air-conditioning companies—especially in places like Tucson, Ariz., where Rice works and residents sweltered in 100-degree heat most days this summer. For years, Rice, 43 years old, was skeptical when out-of-state investors offered to buy his company. He assumed most of them knew little about skilled-trade work or his customers. They were just looking to make a buck. But in 2022, when approached by a local HVAC company backed by private equity, he changed his mind, figuring that they knew the business.”