What we’re reading (9/11)
“Mortgage Rates Are At An 11-Month Low. Will That Save This Housing Market?” (Wall Street Journal). “Mortgage rates fell this week to their lowest level in nearly a year due to widespread expectations that the Federal Reserve will cut rates next week, offering the beleaguered housing market some relief. The average 30-year fixed mortgage rate fell to 6.35%. That’s the lowest level since October and a notable drop from January, when rates were above 7%, according to Freddie Mac.”
“Opendoor Stock Closes 78% Higher After Company Names New CEO” (CNBC). “Opendoor stock rocketed 78% higher on Thursday after the retail favorite named Shopify executive Kaz Nejatian as CEO and co-founder Keith Rabois as chairman. The meme stock hit a 52-week high and continued a stunning run this year, with shares up more than 500% so far.”
“Why France Is In Big Economic Trouble” (Washington Examiner). “The most recent attempt to put France’s finances in order failed. On Monday, the French Parliament, in a vote of no confidence, rejected the plan of then Prime Minister Francois Bayrou to address France’s intractable deficit problem. Bayrou had proposed that welfare payments be frozen and that two public holidays be eliminated. But the French Parliament, in a vote of 364-194, said ‘no’ to the plan, which would have reduced the fiscal deficit from almost 6% of GDP to around 4.6% of GDP, still far above the 3% limit of the E.U.”
“Sticky Inflation Report Unlikely To Keep Fed Off Course For Rate Cut Next Week” (Yahoo! Finance). “A stickier inflation report isn't likely to kick the Federal Reserve off course for an interest rate cut next week, but it is likely to prevent the central bank from making a jumbo cut of half a percentage point. The Consumer Price Index showed "core" prices, excluding volatile food and energy prices, rose 3.1% for the month of August, in line with expectations and holding the same level as July. Month over month inflation also held steady at 0.3%.”
“Microsoft, OpenAI Reach Non-Binding Deal To Allow OpenAI To Restructure” (Reuters). “Microsoft and OpenAI said on Thursday they have signed a non-binding deal for new relationship terms that would allow OpenAI to proceed to restructure itself into a for-profit company, marking a new phase of the most high-profile partnerships to fund the ChatGPT frenzy.”
What we’re reading (9/2)
“Google Won’t Be Forced To Sell Chrome After Judge Rules Divestment A ‘Poor Fit’ In Landmark Antitrust Case” (Yahoo! Finance). “Google won't be forced to sell Chrome after a federal district judge ruled divestment a ‘poor fit’ in a landmark antitrust case, but it will have to share data that helped it hold onto its search monopoly. The ruling from District of Columbia judge Amit Mehta sent Google's stock soaring by more than 8% in after-hours trading.”
“Analysis-Investors On Edge As September Reset Exposes Simmering US Market Risks” (Reuters). “Market participants have long fretted over frothy valuations in stocks and corporate bonds, even as signs of a slowing economy piled up this summer. At the same time, an escalating spat between Trump and the Federal Reserve raised concerns that political strong-arming of the U.S. central bank could rattle the U.S. Treasury market, even as markets had appeared to take that in stride in recent weeks. On Tuesday, those simmering anxieties boiled over, reignited by fresh doubts about the legality of Trump's tariffs that emerged over the holiday weekend. That pushed stocks and bonds down, with many in the market anticipating more turbulence ahead of a pivotal jobs report on Friday.”
“Eurozone Inflation Accelerates, Priming Continued Rate Pause By ECB” (Wall Street Journal). “Annual inflation picked up pace a little in the eurozone last month, cementing expectations that the European Central Bank will leave interest rates unchanged for a second-straight meeting next week. Consumer prices rose by 2.1% on year in August across the 20 nations that use the euro, European Union figures showed Tuesday. That marks an increase from the 2.0% rate of annual inflation booked in July. Core inflation, which strips out the more volatile shifts in the prices of energy and food, was unchanged at 2.3% on year last month.”
“Economy ‘On The Brink’ Of Recession By End Of Year, Moody’s Economist Warns” (Newsweek). “But to Mark Zandi, chief economist at Moody's Analytics, the warning signs—or ‘red indicators’—are showing up in every corner, from housing to employment to consumer prices. In an interview with Newsweek, Zandi said that his monthslong fears of a major economic downturn may soon come to a head, and that the U.S. economy could slip into a recession by the end of 2025.”
“Spin Magazine Sale Collapses After Buyer Doesn’t Wire The Money” (The Hollywood Reporter). “The wire transfer to seal the deal never went through, Spin CEO Jimmy Hutcheson says, a move that confounded the management team at the publisher as the window to close expired. Airtab’s Cunningham acknowledged the deadline for the deal, describing his company’s team as being cautious and needing to ‘confirm a few things’ but that his desire is still to come to terms on closing the sale. Spin staffers were informed of the deal falling through on Tuesday. Hutcheson describes the situation to THR as baffling, given the sign offs of all of the Next Management Partners’ investors on the deal, the monthslong process to closing, that Airtab had initiated the process of an acquisition and that, the exec claims, Airtab showed up to the deal close without sending cash (aside from a legal deposit).”
What we’re reading (9/1)
“Dow, S&P 500, Nasdaq Futures Waver As Wall Street Enters September With Trade, Fed Drama In Focus” (Yahoo! Finance). “US stocks futures wavered around the flatline Monday with Wall Street set for a delayed open to the week after Monday's closure for the Labor Day holiday. Investors are braced for a tumultuous month, with legal drama around President Trump's tariffs and concerns over Fed independence in high focus.”
“Americans Lose Faith That Hard Work Leads To Economic Gains, WSJ-NORC Poll Finds” (Wall Street Journal). “A new Wall Street Journal-NORC poll finds that the share of people who say they have a good chance of improving their standard of living fell to 25%, a record low in surveys dating to 1987. More than three-quarters said they lack confidence that life for the next generation will be better than their own, the poll found. Nearly 70% of people said they believe the American dream—that if you work hard, you will get ahead—no longer holds true or never did, the highest level in nearly 15 years of surveys.”
“Fed Rate Cut? Not So Fast” (Morgan Stanley). “Fed Chair Jerome Powell signaled in his annual speech in Jackson Hole, Wyoming, that a rate cut cycle could start in September. Morgan Stanley’s Global Investment Committee acknowledges the political pressures on the Fed to ease monetary policy. We also recognize that there has been some labor market cooling that might support a proactive rate cut. Overall, however, we see the case for a reduction as modest and put the odds much lower, at around 50-50.”
“Unlikely Allies: Trump, Pelosi And The Push To Ban Congressional Stock Trading” (Fox News). “Common sense would suggest that Congress shouldn’t be actively trading stocks and bonds while they’re holding office. And 86% of those surveyed in 2023 as part of a University of Maryland study favored a ban on congressional stock trading, with Republicans and Democrats showing nearly identical levels of support.”
“Eli Lilly Is Close To Launching The Strongest Weight-Loss Drug Ever. Somehow, Gym Bros Are Already Taking It To Shred Fat.” (Business Insider). “Retatrutide is a GLP-1 drug, in the same family as Ozempic (semaglutide) and Mounjaro (tirzepatide). It was developed by the pharmaceutical giant Eli Lilly, and it is unique because it mimics three hunger hormones (GLP, GIP, and glucagon), while similar drugs on the market target one or two. In theory, that means more staggering weight-loss results and potentially other benefits. Doctors and researchers are already jokingly referring to retatrutide as the ‘King Kong’ for weight loss because early results in clinical trials suggest it rivals bariatric surgery, and it seems to protect more lean muscle mass.”
August performance review
Prime portfolio: +4.42 percent
Select portfolio: +5.49 percent
SPY ETF: +2.99 percent
Bogleheads portfolio (80 percent VTI + 20 percent BND): +2.74%
September picks available now
The new Prime and Select picks for September are available starting now, based on a model run put through today (August 30). As a note, I will be measuring the performance on these picks from the first trading day of the month, Monday, September 1, 2025 (at the mid-spread open price) through the last trading day of the month, Tuesday, September 30, 2025 (at the mid-spread closing price).
What we’re reading (8/29)
“Dow, S&P 500, Nasdaq Slide On Inflation Worries, Ending 4th Winning Month Lower” (Yahoo! Finance). “US stocks retreated from record highs on Friday as Wall Street digested an update on consumer inflation that showed prices firming higher above the Fed's target in July.”
“There’s A Stunning Financial Problem With AI Data Centers” (Futurism). “[N]ew data centers have a very tiny runway in which to achieve profits that currently remain way out of reach. By Kupperman's projections, a brand new data center will quickly become a Theseus’ ship made up of some of the most expensive technology money can buy. If a new data center doesn't start raking in mountains of cash ASAP, the cost to maintain its aging parts will rapidly overtake the revenue it can bring in.”
“Why Aren’t Markets Freaking Out?” (Paul Krugman). “Do financial markets doubt that Trump will get his way [with the Fed]? Or do they reject mainstream economics and the clear examples of countries like Turkey and Argentina? Neither. My read of economic and financial history is that market pricing almost never takes into account the possibility of huge, disruptive events, even when the strong possibility of such events should be obvious. The usual pattern, instead, is one of market complacency until the last possible moment. That is, markets act as if everything is normal until it’s blindingly obvious that it isn’t.”
“Welcome To The New ‘Made In China’ Era — And It Looks A Lot Different” (Business Insider). “From Labubu to Luckin Coffee, Chinese retail chains are betting big that American consumers can revive the growth they're losing at home — and relying on cultural relevance and competitive pricing to make it happen. A Business Insider analysis of top Chinese brands shows how they're expanding their empires by opening brick-and-mortar stores beyond their borders.”
“Your Boss Doesn’t Have Time To Talk To You” (Wall Street Journal). “Need a minute with your boss? Good luck. Managers are overseeing more people as companies large and small gut layers of middle managers in the name of cutting bloat and creating nimbler yet larger teams. Bosses who survive the cuts now oversee roughly triple the people they did almost a decade ago, according to data from research and advisory firm Gartner. There was one manager for every five employees in 2017. That median ratio increased to one manager for every 15 employees by 2023, and it appears to be growing further today, Gartner says.”
What we’re reading (8/28)
“Higher Prices Are Coming For Household Staples” (Wall Street Journal). “U.S. companies have an unwelcome message for inflation-weary consumers: Prices are going up. Companies including Hormel Foods, J.M. Smucker and Ace Hardware said this week they would raise prices for reasons ranging from higher meat costs to tariffs. Large retailers like Walmart, Target and Best Buy said some tariff-related price increases are already in place. More are on the way.”
“Big Tech Investment Powers Nvidia Results, But Wall Street Says ‘Inevitable’ Slowdown Looms” (Yahoo! Finance). “Big Tech's massive artificial intelligence investments continued to fuel Nvidia’s (NVDA) rapidly growing data center business in the second quarter, but Wall Street is flagging the risk of a slowdown and what that means for the AI chipmaker.”
“The Calculus Of Value” (Howard Marks). “What’s the bottom line of the calculus? Fundamentals appear to me to be less good overall than they were seven months ago, but at the same time, asset prices are high relative to earnings, higher than they were at the end of 2024, and at high valuations relative to history. Most bull markets are built through the addition of a “constellation of positives” on top of a well-functioning economy. Today I see elements that include the following: the positive psychology and ‘wealth effect’ resulting from recent gains in markets, high-end real estate, and crypto, the belief that, for most investors, there really is no alternative to the U.S. markets, and the excitement surrounding today’s new, new thing: AI.”
“The Heroes Of US Central Banking” (Steven Roach). “The dual mandate – price stability and full employment – has created a tough balancing act for the central bank. Powell methodically laid out the factors currently weighing on both, from tariffs and immigration policy (which are affecting supply as well as demand) to the recent underlying loss of momentum in employment and GDP growth. Powell drew comfort from a still-low unemployment rate but emphasized a “curious kind of balance” in the labor market. That is Fedspeak for “precarious,” in that it could quickly give way to higher joblessness. I take this as a key factor in assessing the shifting balance of risks that will guide future policy actions.”
“The Boss Has Had It With All The Office Activists” (Wall Street Journal). “The new, hard-line playbook that companies are adopting to confront employee activism reflects two developments: One is a political climate in which companies risk the ire of the White House—and some consumers—if they appear to cater to ‘woke’ forces, including their own staff. The other is an ever-tougher job market in which white-collar workers—especially in tech—have lost considerable leverage. The result is a more adversarial employer-employee dynamic in which bosses are far less concerned with accommodating their workers’ political and personal views. These days, many business leaders would just as soon trim head count as appease vocal staff. That has fired up some office activists even more.”
September picks available soon
I’ll be publishing the Prime and Select picks for the month of September before Monday, September 1 (the first trading day of the month). As always, SPC’s performance measurement for the month of August, as well as SPC’s cumulative performance, will assume the sale of the August 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, August 29). Performance tracking for the month of September will assume the September 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, September 1).
What we’re reading (8/24)
“Dow, S&P 500, Nasdaq Futures Steady After Record Surge With Nvidia Earnings In Focus” (Yahoo! Finance). “With earnings season continuing to roll on, Nvidia, the most valuable stock in the S&P 500, reports results after the closing bell Wednesday. Analysts see the chipmaker posting earnings of $1.01 per share on $46.13 billion in revenue. Price targets have been climbing in the lead-up, reflecting optimism that demand for AI hardware remains high.”
“Stagnant Job Market Is A Rising Risk For The U.S. Economy” (Wall Street Journal). “The labor market has moved front and center for the Federal Reserve, highlighting its fragility and risk to the economy. The good news is that unemployment remains low, and employers haven’t been all that interested in laying people off. The bad news is that companies haven’t been all that interested in hiring, either. This precarious situation means even a relatively small increase in layoffs could lead the economy to start shedding jobs—a process that can be difficult to reverse once it starts.”
“‘Powell Clearly Opens The Door’: Markets Surge As Speculative Bets Get Another Boost From Dovish Jay Powell” (Yahoo! Finance). “‘Equity markets reacted very positively,’ Scott Chronert, managing director of US equity strategy at Citi, wrote in a Friday note, highlighting the Russell 2000, a benchmark for small-cap stocks, had the most ‘striking surge’ as investors shifted money into more economically sensitive names. That broadening story, which captured Wall Street’s attention this week, was also evident with the equal-weighted S&P 500, which gives smaller companies the same influence as megacap tech, slightly leading the headline index.”
“Why A Landmark Settlement On Realtor Fees Hasn’t Cut Costs” (Wall Street Journal). “The real-estate industry’s landmark settlement reworked how real-estate agents get paid, raising hopes that the costs associated with home buying and selling would come down. A year later, it hasn’t happened. The average commission paid to a buyer’s agent in the second quarter of 2025 was 2.43% of the home’s sale price, up from 2.38% a year earlier, according to an analysis by real-estate brokerage Redfin.”
“Diversifying Society’s Leaders? The Determinants And Causal Effects Of Admission To Highly Selective Private Colleges” (Raj Chetty, David Deming, and John Friedman). “We use anonymized admissions data from several colleges linked to income tax records and SAT and ACT test scores to study the determinants and causal effects of attending Ivy-Plus colleges (Ivy League, Stanford, MIT, Duke, and Chicago). Children from families in the top 1% are more than twice as likely to attend an Ivy-Plus college as those from middle-class families with comparable SAT/ACT scores. Two-thirds of this gap is due to higher admissions rates for students with comparable test scores from high-income families; the remaining third is due to differences in rates of application and matriculation. In contrast, children from high-income families have no admissions advantage at flagship public colleges. The high-income admissions advantage at Ivy-Plus colleges is driven by three factors: (1) preferences for children of alumni, (2) weight placed on non-academic credentials, and (3) athletic recruitment. Using a new research design that isolates idiosyncratic variation in admissions decisions for waitlisted applicants, we show that attending an Ivy-Plus college instead of the average flagship public college increases students’ chances of reaching the top 1% of the earnings distribution by 50%, nearly doubles their chances of attending an elite graduate school, and almost triples their chances of working at a prestigious firm. The three factors that give children from high-income families an admissions advantage are uncorrelated or negatively correlated with post-college outcomes, whereas academic credentials such as SAT/ACT scores are highly predictive of post-college success.”
What we’re reading (8/23)
“Powell’s Rate Cut Signal Reflects Economy’s Delicate Position” (Wall Street Journal). “Federal Reserve Chair Jerome Powell cautiously laced up an interest-rate cut next month but delivered a subtle message to anyone expecting aggressive easing: Don’t expect a downhill sprint. The debate among central bankers gathered in Wyoming’s Grand Teton National Park over the past two days suggests the focus is now shifting beyond the September meeting to whether the Fed will entertain cutting again at either of its final two meetings of the year, in October and December. Powell’s cautious tone reflected the tricky economic dynamics the Fed is grappling with: a labor market he described as showing “curious” signs of softness despite a low unemployment rate, and tariff-driven price increases that are just beginning to work their way through the economy.”
“The Fed Gives Up” (Scott Sumner). “The Fed…has basically given up on the whole idea of reforming monetary policy based on the insights of our top monetary theorists. They’ve removed the useful policy reforms of the 2020 document (average inflation targeting) but promised not to repeat the mistake of doing the very different policy that was actually implemented during 2021-22. In a sense, we are back to the 2% flexible inflation target announced back in 2012 and informally adhered to for the most part since the early 1990s.”
“Why Is The Yield Curve Steepening?” (Torsten Sløk). “The US yield curve has started steepening, not only 2s10s but also 10s30s, see the first chart below. There are three reasons why this is happening: 1. The Fed is cutting rates. 2. If the market thinks the Fed is cutting for political reasons, it puts upward pressure on inflation expectations and ultimately long rates, which also steepens the curve […] 3. Growing Treasury issuance is putting upward pressure on long rates[.]”
“Credit Fuels The AI Boom — And Fears Of A Bubble” (Bloomberg). “key players in the industry acknowledge there is probably pain ahead for AI investors. OpenAI Chief Executive Officer Sam Altman said this week that he sees parallels between the current investment frenzy in artificial intelligence and the dot-com bubble in the late 1990s. When discussing startup valuations he said, ‘someone’s gonna get burned there.’ And a Massachusetts Institute of Technology initiative released a report indicating that 95% of generative AI projects in the corporate world have failed to yield any profit.”
“Corporate Share Repurchases And The 2023 Excise Tax” (Don Autore, et al.). “The Inflation Reduction Act of 2022 imposes a 1 % excise tax on US corporate share repurchases, effective January 1, 2023. The tax's implementation is associated with a significant decline in corporate repurchases that is not offset by a corresponding increase in dividends. Aggregate repurchases decline from about $1 trillion in 2022 to just over $800 billion in 2023, and the average firm reduces quarterly repurchases (as a fraction of market capitalization) by roughly 25 %. The decline in repurchases by US firms far exceeds a contemporaneous decline in repurchases by Canadian firms, is large in a historical context, and is not driven by firm fundamentals. Tax-induced cuts to repurchases are associated with an increase in cash but no increase in investment, implying that the tax has not generated the stated policy objective.”
What we’re reading (8/17)
“Powell’s Last Stand: His Legacy And The Fed’s Independence Are On The Line At Jackson Hole” (Barron’s). “Federal Reserve Chair Jerome Powell will take the stage next Friday at the Fed’s annual Jackson Hole Economic Symposium to deliver what may be the defining speech of his career. The speech won’t be lengthy— last year’s version clocked in at just over 15 minutes—but with his term as chair ending next May and the Fed’s performance under attack by the Trump administration, Powell may see Jackson Hole as his last or, at least, his best chance to cement his legacy and make the case for the central bank’s independence.”
“Strong Crop Of Earnings Eases Investors’ Economic Concerns” (Wall Street Journal). “The job market is cooling. Tariff rates are rising. But American companies still seem to be doing just fine. With the latest earnings season nearly done, top- and bottom-line results from companies in the S&P 500 are handily beating expectations that had been lowered after President Trump announced sweeping duties on imports in April. Profits are expected to have risen around 12% in the second quarter from a year earlier, according to FactSet, far ahead of the 5% growth analysts predicted in early July. While much of that earnings growth has been driven by tech companies, corporate chiefs also have sounded more optimistic about the economy than they did in the spring. Earnings calls including the word “recession” have plummeted 84%, according to AlphaSense.”
“Inflation Alarm Bells Went Off Again And Prices Are Rising. Just How Bad Is It Going To Get?” (MarketWatch). “The biggest increase in wholesale prices in three and a half years stunned Wall Street, but is tariff-related inflation really set to soar? The proof is far from ironclad. The latest pair of inflation reports, to be sure, were not reassuring. A key measure of consumer prices showed the largest advance in six months and pushed the yearly rate back above 3%. Just six months ago — before the U.S. trade wars — the rate of inflation was widely expected to slow this year to close to the Federal Reserve’s 2% goal. Not anymore.”
“Why Hands-Off Investing Pays Off” (New York Times). “[A] new study of investor behavior by Morningstar…found that, on average, the actual returns of fund investors were significantly less than the posted market returns, a discrepancy explained by poor trading decisions — buying when the market was high and selling when prices were low. Over extended periods — say, 30 years — this drag on returns produces chilling results: a reduction in the money in an average investor’s portfolio of more than 18 percent, according to Morningstar calculations performed at my request.”
“1910: The Year the Modern World Lost Its Mind” (Derek Thompson). “When we hear about technological change and social crisis in the 21st century, it is easy to imagine that we are living through a special period of history. But many eras have grappled with the problems that seem to uniquely plague our own. The beginning of the 20th century was a period of speed and technological splendor (the automobile! the airplane! the bicycle!), shattered nerves, mass anxiety, and a widespread sense that the world had been forever knocked off its historical axis: a familiar stew of ideas.”
What we’re reading (8/15)
“Dow, S&P 500, Nasdaq Notch Weekly Wins As Slew Of Data Muddies Rate-Cut Path” (Yahoo! Finance). “US stocks were mixed on Friday as Wall Street tempered its rate-cut hopes amid economic data this week that showed higher-than-expected wholesale inflation and a rise in July retail sales. A meeting between President Trump and Russian President Vladimir Putin was also in focus as traders looked for clues on how the outcome could steer markets.”
“The Palantir Mafia Behind Silicon Valley’s Hottest Startups” (Wall Street Journal). “Alumni have either started or are leading more than 350 tech companies, and at least a dozen have been valued at over $1 billion, says Luba Lesiva, who was head of investor relations at Palantir from 2014 to 2016. Lesiva runs a venture firm called Palumni VC, a play on the words Palantir alumni, which invests in startups founded or led by ex-Palantir employees.”
“OpenAI Staffers To Sell $6 Billion In Stock To SoftBank, Other Investors” (Bloomberg). “Current and former OpenAI employees plan to sell approximately $6 billion worth of shares to an investor group that includes Thrive Capital, SoftBank Group Corp. and Dragoneer Investment Group, in a deal that values the ChatGPT maker at $500 billion, according to people familiar with the matter.”
“Spotting Clouds In A Carefree Summer Market” (Wall Street Journal). “The list of what is actually giving investors pause is remarkably short, itself a reason for concern. If stocks climb a wall of worry, they may be approaching the top—and the nasty slide down the slope of hope. What should be concerning them divides into three: the economy, stock valuations and politics.”
“This Is The Staggering Number Of Hours New Yorkers Spend On Their Phones Each Day: ‘Nonstop Loop of Distraction’” (New York Post). “To calculate the lengths, investigators converted the average screen time in every state into seconds, then multiplied each figure by 6.3 (the length of an iPhone 16 Pro Screen) over 10 (the frequency of a scroll, in seconds), resulting in the distance traveled in inches per day. The resulting figure was then divided by 12 to get the distance in feet per day. That figure was then divided by 5,280 to get the distance in miles per day, and then multiplied by 365 to get the final number.”
What we’re reading (8/14)
“Nobody’s Buying Homes, Nobody’s Switching Jobs—And America’s Mobility Is Stalling” (Wall Street Journal). “Americans are stuck in place. People are moving to new homes and new cities at around the lowest rate on record. Companies have fewer roles for entry-level workers trying to launch their lives. Workers who do have jobs are hanging on to them. Economists worry the phenomenon is putting some of the country’s trademark dynamism at risk.”
“The Hidden Risks In Private Equity Funds” (Larry Swedroe).Perhaps the most egregious practice in the 40 Act private equity space involves charging carry fees on unrealized gains. This means investors pay performance fees on paper profits that may never materialize into actual returns. No sophisticated institutional investor would accept such terms, understanding that unrealized gains—especially those created through immediate markups—may prove fictitious over time. The practice essentially allows fund managers to extract fees based on their own valuation assumptions rather than proven investment performance. This creates a dangerous misalignment of incentives where managers benefit from aggressive markups regardless of ultimate investment outcomes. Retail investors should absolutely avoid any fund that charges carry fees on unrealized gains.”
“Slowly Strangling The Pharmaceutical Industry” (Civitas Institute). “Unlike many private uses of monopoly power, a government monopoly, backed by state force, can last a long time. Its short-term effects are manifest, just as in the selection derby when companies lobby the government to direct its wrath against one of its competitors, so that it can ease its burden. But it will still not escape losses even if it avoids the executioner’s axe, because the presence in the market of an underpriced substitute will force it to cut rates or lose customers. And in the long run, drug development will be impaired across the board because no one wants to develop the next blockbuster drug if the government takes away its gains by clever regulation. Indeed, matters could get still worse if the government expands the program or eases the conditions for imposing its prices. And for what? The stated justification is to reduce Medicare costs—but in the worst possible way. The system is broken in its basic operations. Yet so long as these monopoly devices prop it up, meaningful reform remains far away, which is why the Second Circuit’s misplaced reliance on consent promises to usher in a bleak age for private drug development.”
“If You’re Feeling FOMO, Envy And Greed About Record Stock Prices, You’re Not Alone. That’s How Market Bubbles Form.” (MarketWatch). “[A] market bubble can materialize even when most investors are worried about one. Like now. A recent Bank of America fund-manager survey found that a record 91% of survey participants believe the stock market is overvalued, and Google Trends shows a sizable increase in recent weeks in the number of finance-related searches focusing on bubbles, as you can see from the chart below.”
“Hedge Funds Shift Bets To Double Down On Big Tech Amid AI Boom” (Yahoo! Finance). “Wall Street's largest hedge funds, Bridgewater Associates, Tiger Global Management and Discovery Capital, increased their exposure to Big Tech in the second quarter amid a generational boom in the growth of artificial intelligence. During the June quarter, hedge funds cut their exposure to laggards in industries like aerospace and defense, and consumer and retail, as part of a broader move back to momentum investing.”
What we’re reading (8/13)
“What Does Palantir Actually Do?” (Wired). “Palantir is often called a data broker, a data miner, or a giant database of personal information. In reality, it’s none of these—but even former employees struggle to explain it.”
“How One Big Private-Equity Fund Makes Its Numbers Incomprehensible” (Wall Street Journal). “Partners Group Private Equity (Master Fund), which last reported almost $16 billion of net assets…is the largest SEC-registered private-equity fund, according to Interval Fund Tracker. Individuals investing in the fund must meet certain minimum financial criteria. To exit from the fund, investors submit redemption requests during designated tender periods. The schedule of investments in the fund’s latest annual report listed 1,089 individual private-equity investments in a table that included the fair value and acquisition date for each. In a footnote to that table, however, it listed 1,095 different cost figures. That is six more cost figures than there were investments. The footnote spanned three pages, single-spaced. In other words, there is no way someone reading the annual report could determine which cost figure applied to which investment—and no way to gauge which investments might have fishy markups.”
“Private Equity Is Knocking on the Door of Americans’ Retirement Funds. Don’t Let It In.” (Barron’s). “Employers are allowed to auto-enroll eligible employees into 401(k) plans. Though employees can opt out of enrollment or choose their own investments, in practice, nearly everyone who is auto-enrolled puts their savings into target date funds. Were those funds to include private equity, millions of workers’ savings would be channeled into one of Wall Street’s most opaque and expensive products. Plan committees would be shielded from fiduciary liability so long as they follow Department of Labor rules for which default funds they use. Savers would effectively be conscripted into alternative investments. If private equity truly offered compelling value for retirement savers, it wouldn’t require regulatory capture and behavioral inertia to access their capital. Genuine investment opportunities sell themselves to informed buyers over time, not through default settings and liability shields.”
“Allocators Are Betting on Active — But The Numbers May Be Against Them” (Institutional Investor). “Despite more allocators depending on active management to generate returns amid volatility, the numbers continue to show that the vast majority of actively managed funds fail to beat their benchmarks. New research from Morningstar shows that only 33 percent of actively managed mutual funds and ETFs survived and outperformed their passive peers over the year ending June 2025 — a 14 percentage-point drop from the previous year.”
“Can Lower(ed) Expert Opinions Lead To Better Consumer Ratings?: The Case Of Michelin Stars” (Xingyi Li, Yiting Deng, and Puneet Manchanda, and Bert de Reyck). “Expert opinion exerts tremendous influence on the purchase journey, but its effect on overall consumer experience is ambiguous because it can give rise to both “expectation” and “reputation” effects. This paper explores the effect of expert opinions on consumer experience via the lens of consumer reviews in the restaurant industry, where the expert opinions are conveyed by Michelin stars. The paper uses a unique data set based on the Michelin Guide for Great Britain & Ireland from 2010 to 2020. The data include consumer reviews on TripAdvisor for all restaurants that were awarded Michelin stars during this period and a large pool of potential control restaurants…We find…that a loss in Michelin stars leads consumers to become less focused on value and become less demanding regarding service.”
What we’re reading (8/11)
“The Death of Diversification: Why Buffett Was Right All Along” (RealClear Markets). “Warren Buffett famously said that “diversification is protection against ignorance. It makes little sense if you know what you are doing.” For decades, this statement has been brushed aside as the musings of a genius with an unusually high risk tolerance. In truth, it was a quiet indictment of the entire financial industry. Diversification was once a prudent guardrail. It is now a crutch. In a world increasingly allergic to judgment, we have replaced depth with breadth and conviction with convenience. Why learn to understand a business deeply when you can simply own all of them at once?”
“Trump Fired The Labor Statistics Chief And The Markets Shrugged. That’s Concerning.” (MSNBC). “What financial markets, and even the Supreme Court, seem to have overlooked in focusing on the important goal of an independent Federal Reserve is that independence without accurate information is of limited value. The Fed, like all of us trying to understand the macroeconomy in real time, relies on an immense flow of accurate, unbiased data produced by thousands of workers in both the digital and physical worlds.”
“The Era Of Big Raises For Low-Paid Workers Is Over” (Wall Street Journal). “Something remarkable happened in the years immediately preceding and, especially, following the pandemic: Wages for poor workers began rising much faster than they did for the rich. That era may have now come to at least a temporary halt. And with worries about the health of the job market heightened following the disappointing July jobs report, it may have ended altogether. Wage growth for low-income workers looks to have significantly deteriorated in recent months, while wage growth for their higher-income counterparts has held up much better. It is a shift that could matter not just for low-paid workers, but the overall economy. “
“The Rising Returns To R&D: Ideas Are Not Getting Harder To Find” (Ando, Bessen, and Wang). “R&D investment has grown robustly, yet aggregate productivity growth has stagnated. Is this because “ideas are getting harder to find”? This paper uses micro-data from the US Census Bureau to explore the relationship between R&D and productivity in the manufacturing sector from 1976 to 2018. We find that both the elasticity of output (TFP) with respect to R&D and the marginal returns to R&D have risen sharply. Exploring factors affecting returns, we conclude that R&D obsolescence rates must have risen. Using a novel estimation approach, we find consistent evidence of sharply rising technological rivalry and obsolescence. These findings suggest that R&D has become more effective at finding productivity-enhancing ideas, but these ideas may also render rivals’ technologies obsolete, making innovations more transient. Because of obsolescence, rising R&D does not necessarily mean rising aggregate productivity growth.”
“July CPI Report Expected To Show Inflation Accelerated Amid Tariff Pressures” (Yahoo! Finance). “According to Bloomberg data, headline CPI is expected to have increased 2.8% year over year in July, up from a 2.7% rise in June. On a monthly basis, prices are forecast to increase 0.2%, a slight slowdown from June’s 0.3% gain, driven by lower gasoline prices and expectations of moderately softer food inflation.”
July performance review
Prime: -3.03%
Select: -1.55%
SPY ETF: 2.55%
Bogleheads (80% VTI + 20% BND): 2.02%
What we’re reading (8/10)
“Laffer Curve In The United Kingdom?” (Scott Sumner). “More broadly, I believe that the current malaise in the European economy partly reflects the long run effects of various tax and spending policies, which have slowly eroded the tax base. European countries that did not opt for a big government model, such as Switzerland, are doing better than their more highly taxed neighbors.”
“Retreats, Coaching, And Therapy: Inside The $1 Billion Cottage Industry Cashing In On The Retail-Trading Phenomenon” (Business Insider). “In recent years, a cottage industry has taken root amid the hype for stock trading. Social media is rife with businesses offering courses, getaways, one-on-one coaching, and other services that claim to improve traders' performance and get them in the right mindset to turn a profit.”
“American Companies Are Buying Their Own Stocks At A Record Pace” (Wall Street Journal). “U.S. companies have announced $983.6 billion worth of stock buybacks so far this year, the best start to a year on record, according to Birinyi Associates data going back to 1982. They are projected to purchase more than $1.1 trillion worth overall in 2025, which would mark an all-time high.”
“Dollar Steady Before Inflation Report, US-China Tariff Deadline” (Reuters). “The U.S. dollar stabilised on Monday after last week's losses, as markets await Tuesday's key U.S. CPI report for July and focus on developments in trade talks between Washington and Beijing ahead of a deadline to avoid the imposition of higher tariffs. The dollar index was flat at 98.25 after a 0.4% decline last week. Against the yen, the dollar was unchanged at 147.685 yen, with Japanese markets closed for the Mountain Day holiday. Trade talks were in focus as Trump's August 12 deadline for a deal between the U.S. and China loomed, particularly around chip policy.”
“Gold Prices Are On A Rollercoaster After A Curious Tariff Ruling That The White House Called ‘Misinformation’” (CNN Business). “
The global gold market has been thrown into fresh turmoil after a US government agency indicated that bullion would not be exempt from tariffs. Imports of one kilo and 100-ounce gold bars are subject to reciprocal tariffs, according to a July 31 Customs and Border Protection letter reviewed by CNN. The revelation perplexed Wall Street traders, who had expected bullion to be exempt from duties.”
What we’re reading (8/7)
“Dow Slides, Nasdaq Jumps To Record As Tariffs Kick In, Trump Nominates Miran To Fed board” (Yahoo! Finance). “US stocks trimmed losses on Thursday, finishing mixed after President Trump's sweeping tariffs hit dozens of US trade partners. Meanwhile, Trump also previewed coming chip tariffs, suggesting a carveout that could benefit Big Tech companies. The tech-heavy Nasdaq Composite rose nearly 0.4% to close at a fresh record, while the S&P 500 ended little changed. The Dow Jones Industrial Average slipped 0.5%.”
“Auto Industry Takes $12 Billion Hit From Trade War” (Wall Street Journal). “President Trump’s tariff war has inflicted almost $12 billion of losses on global automakers, the biggest hit they have faced since the pandemic. The scary reality: This may be just the beginning. Beyond the continuing cost of tariffs, automakers in the U.S., Japan, South Korea and Europe face years of retooling and supply-chain tweaks to adjust to the new realities. This comes after they spent heavily to reshape factories for electric vehicles.”
“Stock Buybacks Are Surging. Here’s Why It Matters To Your Portfolio.” (MarketWatch). “A surge in share repurchases represents tentativeness about the future. That might seem counterintuitive, but researchers have found that when corporate executives feel confident about what’s coming down the pike, they tend to use excess cash to increase dividends. When, like today, they are less confident, they instead tend to repurchase shares.”
“How AI Conquered the US Economy: A Visual FAQ” (Derek Thompson). “Nobody can say for sure whether the AI boom is evidence of the next Industrial Revolution or the next big bubble. All we know is that it’s happening. We can all stop talking about ‘what will happen if AI dominates the economy at such-and-such future date?’ No, the AI economy is here and now. We’re living in it, for better or worse.”
“Tesla’s Biggest Rivals Warn the EV Party Might Be Over” (Gizmodo). “After a brief sugar rush of sales, Tesla’s top rivals are bracing for a brutal hangover, hit by a double punch of hostile policies from the second Trump administration: crippling tariffs and the fast-approaching end of the federal EV tax credits that have propped up the industry for years.”
What we’re reading (8/6)
“How Palantir Won Over Washington—And Pushed Its Stock Up 600%” (Wall Street Journal). “The blind run into AI is one of a series of decisions by Palantir that have positioned the company today as a power player in the Trump administration, an integral tool for national security and the most expensive stock in the S&P 500. On Monday, it reported its best-ever earnings with more than $1 billion in revenue in the second quarter, 53% growth in earnings from U.S. government contracts and total booked contracts valued at $2.3 billion.”
“The Militarization Of Silicon Valley” (New York Times). “[W]eapons and defense start-ups are taking off. Andreessen Horowitz, a venture capital firm, said in 2023 that it would invest $500 million in defense technology and other companies that would help America ‘move forward.’ Y Combinator, the start-up incubator known for hatching companies like Airbnb and DoorDash, funded its first defense start-up in August 2024. Venture capital investment in defense-related companies surged 33 percent last year to $31 billion, according to McKinsey.”
“Healthcare Stocks Have Been Beaten Up. The Case For Buying Now.” (Barron’s). “[D]arn, don’t their valuations look attractive. The broader healthcare ETF is trading at just over 16 times expected aggregate earrings for the coming 12 months, 27% lower than the S&P 500’s just over 22 times. That’s a particularly steep discount, about double the average over the past decade.”
“Tokenised Trading Creates Structural Risks” (Financial Times). “A new generation of blockchain-based platforms is offering synthetic access to financial assets under the banner of decentralisation and financial inclusion, including fractional equities, indices, and yield-bearing tokens. Their promise is seductive: instant settlement, global access, and freedom from intermediaries. But behind the sleek interfaces and technical rhetoric lies a structural reality that regulators, institutions, and the public can no longer afford to ignore. These systems do not decentralise power in any meaningful governance sense. They decentralise accountability, dispersing legal obligations across a network of offshore entities, unaudited smart contracts, and user-facing wrappers that obscure the true nature of the risk.”
“Fed's Daly: Fed Will Likely Need To Lower Rates In Coming Months As Job Market Has Slowed” (Yahoo! Finance). “San Francisco Federal Reserve president Mary Daly said Wednesday that the Federal Reserve will likely need to lower rates in the coming months, noting that while tariffs will boost inflation in the near term, the job market has slowed. ‘The labor market has softened. And I would see additional slowing as unwelcome, especially since we know that once the labor market stumbles, it tends to fall quickly and hard,’ Daly said in a speech in Alaska. ‘All this means that we will likely need to adjust policy in the coming months.’”
What we’re reading (8/5)
“Bets On Fed Rate Cuts Are Sweeping Through The US Bond Market” (Bloomberg). “Positioning in options tied to the Secured Overnight Financing Rate, which closely tracks the expected trajectory of US monetary policy, shows investors readying for the possibility of cuts in each of the three remaining meetings this year, bringing down rates by a total of 75 basis points in 2025. Other plays on SOFR have included bets on a 50 basis-point cut at the central bank’s next meeting, in September.”
“Why America’s New Crypto Regime Makes Other Countries Nervous” (Kenneth Rogoff). “[B]y proffering an official stamp of approval, the U.S. is potentially providing a powerful vehicle for facilitating tax evasion and all manner of illegal activity worldwide. It doesn’t have to be this way.”
“Trump Says He Will Decide On Fed Governor Before End Of The Week” (Bloomberg). “President Donald Trump said he would make his decision on a replacement for outgoing Federal Reserve Governor Adriana Kugler this week as he looks to make his imprint on the central bank’s monetary policy. The Fed announced on Friday that Kugler would resign from her seat on the board of governors before her term is up in January, giving Trump an earlier than expected opportunity to tap a candidate more closely aligned with his calls for the central bank to lower interest rates.”
“Electricity Costs Rise Amid Data Center Boom” (Axios). “Electricity costs are rising nationwide — and could get even higher for some amid the explosion in data centers powering AI and more. Surging power bills could further stress many Americans' budgets as pretty much everything else gets more expensive, too.”
“Andreessen Horowitz Fled Delaware And Moved To Nevada. It’s More About Vibes Than Substance.” (Business Insider). “Andreessen Horowitz, often called a16z, cited several reasons for moving to Nevada: stronger legal protection for corporate directors, tighter limits on shareholder lawsuits, and a business-friendly court system. It said this sets Nevada apart from Delaware, where an outsize share of America's business lawsuits are filed. Some critics say a16z's beef with Delaware's corporate laws don't make much sense because it's not a corporation; all the entities that it moved to Nevada are LLCs, or limited liability companies. ‘They're either being accidentally imprecise or intentionally disingenuous,’ said Samantha Prince, a law professor at Penn State University. ‘Andreessen is criticizing Delaware and its statutory corporate framework, but that doesn't apply to LLCs.’”