What we’re reading (12/5)
“Police Zero In On New York Hostel In Hunt For UnitedHealth Shooter” (Wall Street Journal). “Police are combing New York City for the suspect who used a Sharpie to write ‘deny,’ ‘defend’ and ‘depose’ on cartridges that are believed to have come out of his gun when it jammed, law-enforcement officials said. Some of the words are commonly associated with tactics insurers use to avoid paying claims.”
“Torrent Of Hate For Health Insurance Industry Follows C.E.O.’s Killing” (New York Times). “The fatal shooting on Wednesday of a top UnitedHealthcare executive, Brian Thompson, on a Manhattan sidewalk has unleashed a torrent of morbid glee from patients and others who say they have had negative experiences with health insurance companies at some of the hardest times of their lives.”
“Failure Costs” (Silicon Continent). “Last week the Financial Times published a piece by British entrepreneur Ian Hogarth with a provocative question: can the EU build a trillion dollar company? Hogarth responds that the EU first needs to solve a lack of experienced founders, a lack of ‘audacious capital’, and excessive US buyouts. These answers, according to a recent paper by Olivier Coste and Yann Coatanlem, two French entrepreneurs, miss the point: the reason more capital doesn’t flow towards high-leverage ideas in Europe is because the price of failure is too high. Coste estimates that, for a large enterprise, doing a significant restructuring in the US costs a company roughly two to four months of pay per worker. In France, that cost averages around 24 months of pay. In Germany, 30 months. In total, Coste and Coatanlem estimate restructuring costs are approximately ten times greater in Western Europe than in the United States.”
“The Greatest Scourge In Factorland: Revaluation Alpha = Fake Alpha (JPM Series)” (Research Affiliates). “When introducing a new factor or strategy, few take the time to test whether its historical success stemmed from upward or downward revaluation alpha…Past returns contain both structural alpha and a likely one-time revaluation alpha; however, the sum of the two is not a reliable method for anticipating future structural alpha.”
“Is ‘Rothification’ Coming For Your Retirement Account?” (Morningstar). “The tax incentives for retirement savings will cost the government more than $1 trillion in forgone revenue over the next 10 years. There are also trillions in expensive new tax priorities that members of both parties want to see passed into law. In combination, it’s easy to see why members of Congress will start to explore restricting or even ending some tax benefits for retirement savings. Enter the likely solution of choice: ‘Rothification.’”
What we’re reading (12/3)
“Construction Industry Braces For One-Two Punch: Tariffs And Deportations” (Wall Street Journal). “In Texas, California, New Jersey and the District of Columbia, immigrants make up more than half of construction trade workers, according to Riordan Frost, a senior research analyst at the Harvard Joint Center for Housing Studies. Undocumented workers make up an estimated 13% of the construction industry—more than twice that of the overall workforce, according to a recent estimate from Pew Research Center.”
“Intel Shares Slide As Gelsinger Exit Leaves Chipmaker Without A ‘Quick Fix’” (CNBC). “Intel shares fell 6% on Tuesday, a day after the embattled chipmaker announced the ouster of CEO Pat Gelsinger, whose four-year tenure was marred by market share losses and a major miss in artificial intelligence.”
“South Korea To Lift Martial Law Hours After Shock Announcement” (News.com.au). “Chaos has broken out in South Korea after the nation’s president issued a shock declaration of martial law, sparking widespread protests, before withdrawing it while the country slept. President Yoon Suk Yeol had announced martial law was “critical for defending the country’s constitutional order” in a late-night emergency TV address. He accused the country’s opposition of controlling the parliament, sympathising with North Korea and paralysing the government with anti-state activities.”
“Wells Fargo To Sell San Francisco Headquarters” (Wall Street Journal). “Wells Fargo is set to sell its San Francisco headquarters, part of a broader shift in the bank’s power base to the East Coast. The office at 420 Montgomery St. in San Francisco’s Financial District could be put on the market as soon as this month, people familiar with the matter said.”
“Former Celsius CEO Alex Mashinsky Pleads Guilty, Agrees To 30 years In Prison” (CryptoSlate). “Alex Mashinsky, the former CEO of crypto lender Celsius, has pleaded guilty to two charges related to fraud and market manipulation, agreeing to a sentencing guideline of 30 years in prison. Mashinsky was indicted in July 2023 on seven counts, including fraud, conspiracy, and manipulation of the market for Celsius’ token, CEL. Under the terms of the agreement, Mashinsky has waived his right to appeal any sentence below 360 months in prison.”
December picks available now
The new Prime and Select picks for December are available starting now, based on a model run put through Today (November 30). As a note, I will be measuring the performance on these picks from the first trading day of the month, Monday, December 2, 2024 (at the mid-spread open price) through the last trading day of the month, Tuesday, December 31, 2024 (at the mid-spread closing price).
What we’re reading (11/29)
“10-Year Treasury Yield slides To Lowest Point Since October On Holiday-Shortened Trading Day” (CNBC). “The 10-year Treasury yield retreated to a new low going back to late October on Friday amid a shortened trading day for U.S. markets following the Thanksgiving holiday.”
“Googling Is For Old People. That’s A Problem For Google.” (Wall Street Journal). “If Google were a ship, it would be the Titanic in the hours before it struck an iceberg—riding high, supposedly unsinkable, and about to encounter a force of nature that could make its name synonymous with catastrophe. The trends moving against Google are so numerous and interrelated that the Justice Department’s attempt to dismantle the company—the specifics of which were unveiled Nov. 20—could be the least of its problems.”
“Remote Workers Are Swapping Commute Hours For Side Hustles” (Business Insider). “Remote workers are more likely to have side gigs than their office-based peers — 34% versus 29% — according to a new LinkedIn Workforce Confidence survey of 8,606 US professionals. The trend toward additional income streams appears strongest among those with flexible work arrangements. While only a quarter of full-time employees reported having a side gig, the number jumps to 52% for freelancers and 46% for both contractors and self-employed workers.”
“Member Of Prominent Rothschild Family Found Dead After Laurel Canyon House Fire, Neighbors Say” (Los Angeles Times). “The body discovered at the Lookout Mountain Avenue property was that of William Rothschild, three people told The Times on Thursday. A magazine seen at the property was addressed to ‘WM DE ROTHSCHILD.’ The Rothschilds, a sprawling Jewish family originally from Frankfurt, Germany, long dominated European banking, with its English and French branches playing major roles in finance and politics, most notably during the 18th and 19th centuries. At one point, the Rothschilds were widely considered to have amassed the largest private fortune on Earth.”
“‘We’ve Become An Amusement Park’: The Alaskan Town Torn Apart By Cruise Ship Tourism” (The Guardian). “Residents cherish their access to Alaska’s vast wilderness – its forests, mountains, waters and glaciers. They value the security and sense of community that defines small-town life in America. But Juneau’s identity has fundamentally changed with the rise of an industry that monetises experiences local people take for granted. Hiking, whale watching, fishing and kayaking – everyday activities for Juneauites – are packaged and sold at premium prices aboard the cruise ships.”
December picks available soon
I’ll be publishing the Prime and Select picks for the month of December before Monday, December 2 (the first trading day of the month). As always, SPC’s performance measurement for the month of November, as well as SPC’s cumulative performance, will assume the sale of the November 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, November 29). Performance tracking for the month of December will assume the December 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, December 2).
What we’re reading (11/27)
“FTC Opens Wide-Ranging Antitrust Probe Into Microsoft” (CNN Business). “Microsoft is set to go under the microscope of the nation’s top antitrust watchdog, the Federal Trade Commission, which is launching a sweeping investigation into the tech giant’s practices. The FTC, in a letter sent to Microsoft, demanded that it hand over information to assist in the agency’s investigation, a source familiar with the matter told CNN.”
“A Quarter Of Your Retirement Fund Just Isn’t Keeping Up” (Wall Street Journal). “U.S. stocks have been euphoric lately—and they’ve left international stocks in the dust. The longtime performance gap between the two is widening. Since the end of 2009, an MSCI index tracking equities outside the U.S. has only topped the S&P 500 in two years, according to Dow Jones Market Data. During the S&P 500’s banner 26% rise this year, the index has risen roughly 3%. If that holds through the rest of the year, it would be the biggest performance gap in nearly three decades.”
“Patagonia Gets Serious” (Business Insider). “Since its founding in 1973, Patagonia has positioned itself as a workplace nirvana — a community more so than a company, one that prioritizes the well-being of the Earth and of its employees above all else. But in the past few years, as sales have slowed, the outdoor-apparel brand has buckled down, cutting redundant jobs, tracking performance metrics, and banning long-standing practices such as letting sales representatives sell Patagonia samples to friends and family on the side.”
“AllHere Founder Arrest Shows It’s Easy For Startups To Scam VCs” (Axios). “Joanna Smith-Griffin, founder of an ed-tech app for reducing student absenteeism, was arrested earlier this month and charged with securities fraud, wire fraud, and aggravated identity theft. Smith-Griffin, a onetime member of the Forbes ‘30 Under 30,’ faces decades in prison. Her startup was called AllHere, and raised around $4 million in seed funding led by ReThink Education. In 2021 it raised an $8 million Series A round led by Spero Ventures. Both Rethink Education and Spero received board seats. According to the Justice Department complaint, however, Smith-Griffin lied to investors about nearly everything — including revenue, customer contracts, and cash-on-hand. And she profited, selling around $750,000 of shares into the Series A.”
“The ‘It Doesn’t Matter’ Perspective” (Scott Sumner). “[T]he ‘nothing matters’ perspective goes well beyond cases of markets reacting to compensate for some sort of policy shift. I also suspect that for aggregate outcomes, all sorts of individual policies matter less than one might think. For instance, one viewpoint on which many Democrats and Republican seem to agree is that elections are very important for the future direction of the economy. But are they? The entire stock market response to the recent election could be explained by a single issue—lower corporate tax rates under a new GOP administration. Who is president might matter for the broader economy, but how could we ever know for sure?”
What we’re reading (11/18)
“DOJ Will Push Google To Sell Chrome To Break Search Monopoly” (Bloomberg Law). “Top Justice Department antitrust officials have decided to ask a judge to force Alphabet Inc.’s Google to sell off its Chrome browser in what would be a historic crackdown on one of the world’s biggest tech companies. The department will ask the judge, who ruled in August that Google illegally monopolized the search market, to require measures related to artificial intelligence and its Android smartphone operating system, according to people familiar with the plans.”
“Discount Airline Spirit Files For Bankruptcy” (Wall Street Journal). “Spirit Airlines filed for bankruptcy, overcome by stronger competition for budget fares and the carrier’s own hefty debt obligations. Spirit filed a chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of New York seeking to restructure its debts to bondholders and survive more intense competition from larger airlines for value-minded fliers. The Wall Street Journal reported earlier this month that Spirit was preparing to file for bankruptcy.”
“How ‘Miracle’ Weight-Loss Drugs Will Change The World” (Nature). “Welcome to the healthier, happier world of 2030. Heart attacks and strokes are down 20%. A drop in food consumption has left more money in people’s wallets. Lighter passengers are saving airlines 100 million litres of fuel each year. And billions of people are enjoying a better quality of life, with improvements to their mental and physical health. These are just some of the ways in which analysts forecast that the new wave of incredibly effective weight-loss drugs, known as GLP-1 agonists, might transform societies and save countries trillions of dollars in the long run. The best known is semaglutide, marketed as Ozempic for diabetes, and as Wegovy for weight loss. ‘Short of some crazy unfortunate side effect, this is going to change the world,’ says Chin Hur, a gastroenterologist at Columbia University in New York City.”
“US Judge Told Archegos Founder Can't Afford What Defense Says Is ‘Unjustified’ $10 Billion Restitution” (New York Law Journal). “Prosecutors have asked U.S. District Judge Alvin Hellerstein to sentence Archegos Capital Management founder Sung Kook "Bill" Hwang to 21 years behind bars and forfeit $10 billion. But his lawyers say he's only worth $55 million now.”
“‘Crocodile Of Wall Street’ Gets Prison Time For Role In Huge Bitcoin Theft” (Washington Post). “To the internet, she’s a rapper named Razzlekhan who styled herself as the ‘Crocodile of Wall Street’ and claimed to have more pizzazz than Genghis Khan. But to prosecutors, she’s one half of the “bitcoin Bonnie and Clyde” duo behind a crypto heist involving buried gold coins, Ukrainian and Russian money mules, and the single-largest asset seizure in Justice Department history.”
What we’re reading (11/17)
“Investors Are Betting On A Market Melt-Up” (Wall Street Journal). “U.S. equity exchange-traded and mutual funds drew nearly $56 billion in the week ended Wednesday, the second-largest weekly haul in records going back to 2008, according to EPFR data. Such funds have drawn inflows for seven consecutive months, the longest streak since 2021, when a dizzying market melt-up sent stocks to repeated records.”
“The S&P 500 Has Come To A Major Postelection Crossroads” (MarketWatch). “The construct of volatility derivatives has taken on a more bullish outlook for stocks. This has been occurring since the election and seems to have reached a stabilization point now. The term structures of the VIX futures and of the Cboe Volatility Index are sloping upwards, and the VIX futures are trading at a premium to VIX. In particular, the December VIX futures are trading a full point higher than the November VIX futures, and that is a return to a fully bullish status for stocks.”
“Gold Prices Have Dropped Since The Election. Here’s Why” (Fast Company). “What’s going on? Part of the decline has coincided with the strengthening of the U.S. dollar against other major currencies. Tariffs and trade wars instigated by the United States could push down the value of the euro and other countries’ currencies, and a strong U.S. dollar makes it more expensive for buyers using those other currencies to purchase gold.”
“Jay Bhattacharya, An NIH Critic, Emerges As A Top Candidate To Lead The Agency” (Washington Post). “The rise of Bhattacharya — from being scorned by the nation’s NIH director to possibly occupying his office four years later — reflects how the backlash to coronavirus policies has helped reshape conservative politics and elevate new voices. While Collins and other public health experts maintain that the Great Barrington Declaration’s ideas were rash and would have put vulnerable people at risk, many Americans have come to believe that school shutdowns and other pandemic-related policies lasted too long.”
“AI And The Last Mile” (Anecdotal Value). “So here’s an uncomfortable truth: the "last mile" will become the new gated community, where inside the velvet ropes are expert humans with discernment. While AI promises to democratize everything from college admissions to job hunting, this human discernment will become a luxury good. The wealthy parent hires the counselor who "just knows" which college is the right fit. The well-connected job seeker gets the coffee chat that no algorithm can replicate. Even as AI gets better at matching people with opportunities, those crucial final judgment calls — the ones that often make all the difference — will remain hidden behind the velvet rope of privilege and social capital. We're creating a world where AI algorithms serve the majority while human insight becomes the ultimate premium service.”
What we’re reading (11/15)
“Inside Microsoft’s Struggles With Copilot” (Business Insider). “In September 2023, Microsoft's famously soft-spoken CEO, Satya Nadella, unveiled the company's flagship AI product, Copilot, with sweeping fanfare. ‘Copilot will fundamentally transform our relationship with technology,’ he declared. The AI assistant, he predicted, would give birth to an ‘era that uplifts every person, industry, community, and country.’ Now, a year after Copilot's release, the reviews — both inside and outside Microsoft — indicate that the new product is struggling to live up to the hype.”
“T-Mobile Hacked In Massive Chinese Breach Of Telecom Networks” (Wall Street Journal). “Hackers linked to a Chinese intelligence agency were able to breach T-Mobile as part of monthslong campaign to spy on the cellphone communications of high-value intelligence targets. It is unclear what information, if any, was taken about T-Mobile customers’ calls and communications records.”
“The Explosive Growth Of Private Credit: Is There A Bubble?” (Alpha Architect). “The growth of the private credit market exploded after the global financial crisis of 2008-2009 as private credit rushed to fill the gap that the banking industry was no longer able to fill because of the distress of its balance sheets. Tightened capital standards made loans to middle-market companies unattractive for banks, shutting out most small- and middle-size companies from the bank market. In addition, the 2010 enactment of the Dodd-Frank Act made it increasingly expensive for small banks to operate, cutting off their supply of loans to small and mid-size companies.”
“Prominent Conservative Lawyer Ted Olson, Who Argued Bush Recount And Same-Sex Marriage Cases, Dies” (Associated Press). “One of Olson’s most prominent cases put him at odds with many fellow conservatives. After California adopted a ban on same-sex marriage in 2008, Olson joined forces with former adversary David Boies, who had represented Democrat Al Gore in the presidential election case, to represent California couples seeking the right to marry. During closing arguments, Olson contended that tradition or fears of harm to heterosexual unions were legally insufficient grounds to discriminate against same-sex couples…Olson’s personal life also intersected tragically with the nation’s history when his third wife, well-known conservative legal analyst Barbara Olson, died on Sept. 11, 2001. She was a passenger on American Airlines Flight 77, which crashed into the Pentagon.”
“Berlin’s Beat Goes Quiet As Techno Clubs Close Their Doors” (The Times of London). “According to a new survey by the Club commission, an association of nightclubs, 46 per cent of Berlin’s 150-plus venues are considering closing down permanently in 2025. That is twice the number recorded in a previous survey in February.”
What we’re reading (11/14)
“Wall St Indexes End Lower After Powell Erodes Hopes For December Rate Cut” (Reuters). “Wall Street's main indexes closed lower on Thursday after Federal Reserve Chair Jerome Powell dampened investors' hopes for another interest rate cut this year by saying the U.S. central bank need not rush to ease monetary policy. Powell said at a Dallas Fed event that with the economy still growing, the job market solid and inflation still above the 2% target, the Fed can deliberate carefully on rate cuts.”
“No One Can Find Safe-Deposit Boxes Anymore” (Wall Street Journal). “Longtime deposit-box renters are getting kicked out of their boxes by banks that are shutting down or scaling back the service. Customers say they have been struggling to find the small boxes traditionally kept inside vaults to store family heirlooms and other valuables.”
“Asteroid Mining: Science Fiction Or Future Source Of Raw Materials?” (RealClear Markets). “Asteroids not only represent a potential threat to humanity, they also offer great opportunities, especially for the future. Current estimates suggest that there are between 700,000 and 1,700,000 asteroids with a diameter of at least 1 kilometer. The majority of these asteroids are located within the asteroid belt between Mars and Jupiter. However, there are also approximately 34,000 known near-Earth asteroids (NEAs) – and around 2,000 to 3,000 more are discovered every year. Some of these can be a threat, others present valuable opportunities.”
“Why The Dollar Keeps Getting Stronger” (New York Times). “The recent rise may seem curious, because Mr. Trump has often said that, for the sake of U.S. exports, he would prefer to see the dollar weaken. But his plans to impose tariffs on imports and cut taxes, among other actions, are expected by most economists to do the opposite. Traders appear to agree: The broad-based dollar index is up about 3 percent since Election Day, a big move for that market over such a short period. Almost every major currency has lost value against the dollar this year, with pronounced declines in recent weeks. The Japanese yen is down about 9 percent and the Mexican peso more than 17 percent against the dollar since the start of the year.”
“Not Satire: The Onion Acquires Infowars” (Status). “The Onion has successfully acquired Infowars. The satirical news outlet purchased Alex Jones' right-wing conspiracy empire at a court-ordered auction, the families of the victims of the Sandy Hook Elementary School shooting announced Thursday. ‘The dissolution of Alex Jones’ assets and the death of Infowars is the justice we have long awaited and fought for,’ said Robbie Parker, whose daughter was killed in the 2012 school shooting.”
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.”